 | Existing Home Sales Rose 6.5% in July to a 5.39 Million Annual Rate |
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| Posted Under: Data Watch • Home Sales • Housing |
Implications: This is what a housing recovery looks like. Despite all the fear-mongers saying higher mortgage rates would kill the housing recovery, today we got our first look at sales that would be affected by higher rates, and boy were they wrong. Existing home sales are up 17.2% from a year ago and, with the exception of November 2009, when they were artificially boosted by an $8,000 homebuyer tax credit, they're at the highest level since early 2007. As the chart to the right shows, existing home sales have clearly been trending higher. Higher rates haven't hurt sales for a couple of reasons. First, higher rates reflect expectations of faster economic growth. Second, with home prices rising and expected to keep rising, buyers are more willing to buy than back when rates were lower but buyers thought home prices might fall further. The months' supply of existing homes (how long it would take to sell the entire inventory at the current selling rate) was unchanged at 5.1 in July. Inventories have now grown over the past six months, but we don't see this as a problem. More sellers are coming back into the market as pricing power recovers. In turn, as greater inventory hits the market, it will facilitate even more sales as potential buyers are more likely to find what they're looking for. Also, the months' supply is down substantially from one and two years ago, when it was 6.3 and 9.1, respectively. On the pricing front, median prices for existing homes were up a very strong 13.7% from a year ago. This can be attributed to a few factors. First, relatively low inventories (despite the recent trend) while demand is picking up. Second, fewer distressed sales. Third, more sales of larger homes. Sales of homes priced from $0-$100,000 are down 8.6% from a year ago, while $1,000,000+ homes are up 46.6%. In general, it still remains tougher than normal to buy a home; buyers face tight scrutiny from lenders. As a result, all-cash transactions accounted for 31% of purchases in July versus a traditional share of about 10%. And cash buyers don't care about mortgage rates at all.
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