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US Existing Home Rise Unexpectedly in July: NAR

H.S. Borji
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The sale of previously-owned US homes rose unexpectedly in July to their highest level this year, supporting the view the housing market was finally gaining traction at the start of the third quarter.

Existing US home sales rose 2.4 percent to a seasonally adjusted annual rate of 5.15 million, following a gain of 2.4 percent the previous month, the National Association of Realtors reported today. The increase was well above forecasts, which called for a decline of 0.4 percent.

Sales rose in three of the four US regions, led by a 3.4 percent gain in the South. Existing home sales rose 2.6 percent in the West and 1.7 percent in the Midwest, NAR data showed today. Existing home sales in the Northeast were unchanged.

“The number of houses for sale is higher than a year ago and tamer price increases are giving prospective buyers less hesitation about entering the market,” said NAR chief economist Lawrence Yun in a statement. “More people are buying homes compared to earlier in the year and this trend should continue with interest rates remaining low and apartment rents on the rise.”

However, Yun did warn that affordability will probably decline in the coming years, as mortgage rates “inevitably rise” and price gains continue to outpace median family incomes.

Existing home sales rebounded in the second quarter following a harsh winter that put more strain on the struggling housing market, which began to lose traction last summer. June marked only the first time since October existing home sales reached an annual pace of 5 million. On balance, the housing recovery has had a disappointing year. Existing home sales have increased only five times in the last eleven months.

Rising house prices and weak wage growth could further complicate the housing recovery for the remainder of the year. While mortgage rates remain near-record lows, they are higher than they were a year ago. According to Freddie Mac, the average commitment rate for a 30-year, fixed mortgage for the week ended August 14 was 4.12 percent, down from 4.53 percent at the start of the year.

Earlier this week the Commerce Department said housing starts and building permits rebounded sharply in July, raising optimism the housing recovery was finally emerging from its slumber.

Housing starts surged 15.7 percent last month to a seasonally adjusted annual pace of 1.093 million, the highest level since November of last year. Groundbreaking for single-family homes, which represent the largest component of the market, increased 8.3 percent.

Building permits rose 8.1 percent in July to a seasonally adjusted annual rate of 1.052 million, a sign construction work could increase in the coming months.

A separate gauge of homebuilder confidence released earlier this week showed builder confidence this month rose to its highest level since January, driven in large part by sustained job growth. The US economy has been adding jobs at an accelerated pace this year, with July marking the sixth consecutive month payrolls rose more than 200,000.

The housing market index, courtesy of the National Association of Home Builders, rose two points to 55 this month, topping forecasts.

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