If investors were looking for a sign that the US economy might finally be regaining momentum yesterday’s data release regarding sales of existing homes could just be it. According to figures compiled by the National Association of Realtors in August sales of existing homes climbed to a two year high, increasing by 7.8 per cent. The 4.82 million annual rate was more than forecast by 78 economists participating in a Bloomberg survey whose median prediction was 4.56 million. It was also the highest figure seen since May 2010 and although July’s pace remained unrevised at 4.47 million this data is a strong indicator that the US housing market is clawing its way out of a slump which has lasted several years.
A multiplying population, record-low mortgage rates and more affordable properties are cited as the primary reasons behind this unexpected result. According to an additional report by the Commerce Department more single-family homes were built in August than during any other month for the last two years.
Senior U.S. economist with Nomura Securities International Inc. Ellen Zentner commented on this latest data: ‘The nascent housing recovery has deepened. Ultimately, this improvement will lead to a rise in residential wealth, which tends to lift consumer confidence and spending’.
The report also showed that last month purchases rose by 11 per cent and that since August 2011the median price of an existing home jumped 9.5 per cent to $187,400.
Lawrence Yun, chief economist with NAR, asserted that the price increase was indicative of a real appreciation in property values and a reduction in distressed sales and projected that by the end of 2012 the pace of sales would have achieved a five-year high. During a news conference Yun went on to state that ‘The housing market recovery is becoming much more convincing.’
Furthermore, according to CoreLogic in the first half of 2012 upped real estate values have helped upwards of 1.3 million homeowners regain equity.
These data releases will please the Federal Reserve who, earlier in September, pledged to help lower borrowing costs and aid the housing market by buying $40 billion of mortgage debt. At the time Fed Chairman Ben S. Bernanke said of the action; ‘Our mortgage-backed securities purchases ought to drive down mortgage rates and put downward pressure on mortgage rates and create more demand for homes and more refinancing.’
Despite these optimistic views some analysts are expecting strict lending conditions and persistent unemployment could prevent a more rapid return to the 5 -5.5 million sales pace which the real-estate agents group considers as signalling normal market conditions.
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