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US Existing Home Sales Resume Uptrend in June: NAR

H.S. Borji
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US Existing Home Sales Resume Uptrend in June: NAR

The sale of previously-owned US homes advanced at a strong pace in June, as buyers continued to take advantage of slower price growth and rising inventory levels.

Existing US home sales rose 2.6 percent to an annual rate of 5.04 million, following a gain of 5.4 percent the prior month, the National Association of Realtors reported today. The increase was above forecasts, which called for a 2 percent gain.

June was the first time since October 2013 existing home sales reached an annual pace of 5 million sales.

All four regions of the US experienced sales growth in May, NAR data showed. Existing home sales rose 3.2 percent in Northeast, 6.2 percent in the Midwest, 0.5 percent in the South and 2.7 percent in the West.

“Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country,” said NAR chief economist Lawrence Yun in a press release. “This bodes well for rising home sales in the upcoming months as consumers are provided with more choices.”

Housing starts and building permits unexpectedly declined in June, the Commerce Department reported last week. Housing starts tumbled 9.3 percent to a seasonally adjusted annual rate of 893,000. Building permits – a gauge of residential construction intentions – dipped 4.2 percent to 963,000.

June marked only the fourth increase in home sales in ten months, as the market continues to recover from a disastrous first quarter that was weighed down by inclement weather. Home sales dropped 5.1 percent in January and 0.4 percent in February. Previously-owned home sales would drop another 0.2 percent in March to reach a 20-month low.

The housing sector has struggled with subdued demand due to higher mortgage rates and rising house costs. According to the NAR, mortgage rates are expected to rise in the next 12 months.

According to Freddie Mac, the average national mortgage rate for a 30-year, fixed-rate mortgage dropped to 4.16 percent in June.

Rising house prices shift the burden onto the labour market to sustain the next phase of the housing recovery. US employers added 288,000 nonfarm payrolls in June. That was the fifth consecutive month job growth was above the 200,000 mark, the first stretch of its kind since 1999-2000. The unemployment rate dropped to 6.1 percent. However, with average earnings rising only very modestly this year, more potential homebuyers could remain on the sidelines.

“[T]he lack of wage increases is leaving a large pool of potential homebuyers on the sidelines who otherwise would be taking advantage of low interest rates. Income growth below price appreciation will hurt affordability,” Yun added.

A separate release from the Federal Housing Finance Agency said house prices rose 0.4 percent in May, following a gain of 0.1 percent the previous month that was initially reported as flat.

The housing price index was 6.5 percent below its April 2007 peak.

Compared to May 2013, house prices were up 5.5 percent.

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