Americans are loving their previously-owned homes – sales spiked in September to the highest they’ve been in more than eight years.
Perhaps it’s a sign that the residential housing market is recovering enough to support continued growth of the economy.
September sales of existing homes spiked to 4.7 percent – the second-highest pace in eight years – with an extended low interest rate environment and a jump in demand continuing to back up housing recovery.
According to the National Association of Realtors, existing home sales increased from August to a seasonally-adjusted annual rate of 5.55 million. That makes four out of five months where gains were realized. The real estate market has been picking up over the past three years with prices increasing year-over-year.
As of September, the median price for existing homes in the US was $221,900, up 6.1 percent from the same time last year.
About 4.8 months’ worth of existing housing supply was measured in September based on today’s pace of sales, down from August’s inventory supply of 5.1 months’ worth. This isn’t necessarily any cause for concern right now, considering a slightly slower winter selling season is upon us. But come spring when demand really starts to pick up, home builders will need to start picking up the slack with production.
Distribution of Sales
Though sales were up in all regions of the US in September, it was the Northeast in particular that experienced the highest gain. Existing home sales in the region jumped 8.6 percent from the month before, and 11.8 percent from last September. The West experienced an increase in sales of 6.7 percent, 2.3 percent in the Midwest, and 3.8 percent in the South.
More specifically, it was single family dwellings that took center stage, which spiked 5.3 percent from August.
Sales of new homes increased by 5.7 percent in August, according to a separate report from the Commerce Department.
Closings on single-family dwellings priced between $100,000 and $250,000 increased 9.2 percent from the same time a year earlier, while closings for homes within the the $250,000 to $500,000 price range increased 22 percent.
What’s Behind the Pick Up in Home Sales?
Employment and income prospects have strengthened, which have contributed largely to the positive outlook in the housing market in the US. With safer job security and higher property values, an increasing number of Americans are more confident about moving up in the real estate market. Home-buyer hopefuls are becoming increasingly willing to make a real estate commitment.
Other factors have also contributed, including the Fed’s decision to continue to keep interest rates at historical lows, thereby making it more affordable to obtain a mortgage.
These numbers reflect the slow yet consistent growth in the overall real estate market. The third quarter’s selling season confirms that the housing market is continuing to improve at a rather steady pace.
Earlier this year, new home sales jumped to the highest level since the financial crisis of 2008.
A strengthened economy and stronger income outlooks are largely responsible for the pace increase in new home construction sales. Would-be home buyers therefore are in a better position to take advantage of affordable borrowing costs these days, especially with the extended low interest rate environment we continue to experience.
New home builders are now in the position to play catch-up in order to meet demand, considering today’s annualized pace of new home sales poised at 468,000 units.
There was a slight hiccup in September in terms of new home sales after two straight months of gains, but housing continues to remain on solid footing thanks to a jump in prices.