Positive signs in US property market despite tight credit and low economic confidence
Existing residential property sales in the United States increased in August, even with ongoing tight credit and appraisal problems, along with regional disruptions created by Hurricane Irene, according to the latest figures from the National Association of Realtors.
Monthly gains were seen in all regions with total sales, including single family, townhomes, condominiums and co-ops, increasing 7.7% to a seasonally adjusted annual rate of 5.03 million in August from an upwardly revised 4.67 million in July.
It means sales are now 18.6% higher than the 4.24 million unit level in August 2010 and NAR chief economist Lawrence Yun said he is confident that there are now more positive fundamentals in the real estate market.
‘Some of the improvement in August may result from sales that were delayed in preceding months, but favorable affordability conditions and rising rents are underlying motivations. Investors were more active in absorbing foreclosed properties. In additional to bargain hunting, some investors are in the market to hedge against higher inflation,’ he explained.
Investors accounted for 22% of sales in August, up from 18% in July and 21% in August 2010. First time buyers purchased 32% of homes in August, unchanged from July and slightly above the 31% of August 2010.
All cash sales accounted for 29% of transactions in August, unchanged from July and slightly more than the 28% in August 2010. Investors account for the bulk of cash purchases.
‘We had some disruptions from Hurricane Irene in the closing weekend of August, when many sales normally are finalized, along the Eastern seaboard and in New England,’ said Yun.
‘As a result, the Northeast saw the smallest sales gain in August, and some general impact is expected in September with widespread flooding from Tropical Storm Lee. Aberrations in housing data are possible over the next couple months as markets recover from disrupted closings and storm damage,’ he added.
Yun said an extremely important issue currently is the renewal and availability of the National Flood Insurance Programme, scheduled to expire at the end of this month. ‘About one out of 10 homes in this country need flood insurance to get a mortgage, and we would see significant negative market impacts without it,’ he said.
NAR president Ron Phipps said the market is remarkably affordable for people with secure jobs, good credit and long term plans. ‘All year, the relationship between home prices, mortgage interest rates and family income has been hovering at historic highs, meaning the best housing affordability conditions in a generation,’ he explained.
‘The biggest factors keeping home sales from a healthy recovery are mortgages being denied to creditworthy buyers, and appraised valuations below the negotiated price. Buyers may be able to find more favourable credit terms with community and small regional banks, and realtors can often give buyers advice to help them overcome some of the financing obstacles,’ he added.
The national median existing home price for all housing types was $168,300 in August, which is 5.1% below August 2010. Distressed homes, that is foreclosures and short sales typically sold at deep discounts, accounted for 31% of sales in August, compared with 29% in July and 34% in August 2010.
Total housing inventory at the end of August fell 3% to 3.58 million existing homes available for sale, which represents an 8.5 month supply at the current sales pace, down from a 9.5 month supply in July.
Single family home sales rose 8.5% to a seasonally adjusted annual rate of 4.47 million in August from 4.12 million in July, and are 20.2% above the 3.72 million pace in August 2010. The median existing single family home price was $168,400 in August, which is 5.45 below a year ago.
Existing condominium and co-op sales increased 1.8% to a seasonally adjusted annual rate of 560,000 in August from 550,000 in July, and are 8.3% higher than the 517,000 unit level a year ago. The median existing condo price was $167,500 in August, down 3.3% from August 2010.
Regionally, existing home sales in the Northeast increased 2.7% to an annual pace of 770,000 in August and are 10% above a year ago. The median price in the Northeast was $244,100, which is 5.1% below August 2010.
Existing home sales in the Midwest rose 3.8% in August to a level of 1.09 million and are 26.7% above August 2010. The median price in the Midwest was $141,700, down 3.5% from a year ago.
In the South, existing home sales increased 5.4% to an annual pace of 1.94 million in August and are 16.9% higher than a year ago. The median price in the South was $151,000, which is 0.8% below August 2010.
Existing home sales in the West jumped 18.3% to an annual pace of 1.23 million in August and are 20.6% higher than August 2010. The median price in the West was $189,400, down 13% from a year ago.