New Home Sales Rise
The housing industry continued to gather momentum in April. New home sales, an important measure for the industry’s performance, climbed 2.3 percent last month. Home prices also rose to record highs.
The news comes at a significant time. Spring is a favorite season for homebuying or shopping. According to the Commerce Department, new home sales jumped to a seasonally adjusted rate of 454,000 units. That’s up 2.3 percent from March and 29 percent compared to a year-ago period.
According to Reuters, some economists were expecting an adjusted rate of 425,000 units.
The Commerce Department also reported that the median sales price of a new home skyrocketed 14.9 percent compared to last year. At $271,600, that’s the highest on record. The average new home price was $330,800.
The inventory of new homes in April shot up 3.3 percent to 156,000 units. That’s the highest since October 2011. Given the current inventory levels, it would take 4.1 months to purge the homes that are up for sale in the market. According to industry experts, a six-month supply is normally considered the sign of a healthy market. The tight inventory is triggering a rise in home prices.
Mortgage Rates Climb
Buyers beware. The sweet days of record low mortgage rates may soon be a thing of the past.
For the third week in a row mortgage rates recorded an increase, according to a survey of lenders by mortgage giant Freddie Mac. The average rate on 30-year fixed loans increased to 3.69 percent from 3.51 percent last week.
Rates on the shorter term 15-year loans also climbed from 2.69 percent to 2.77 percent. The short-term loans have been a big hit for homeowners looking to refinance.
Despite the increases, the rates continue to be lucrative for prospective homebuyers and current homeowners. But, not everyone can qualify for these rates. According to the survey, borrowers would have to pay lenders 0.7 percent of the total loan amount to qualify for these rates.
Housing Market Rebound to Continue, Experts Said
Wall Street is brimming with enthusiasm about the housing industry that once caused many shareholders serious anxiety.
Companies such as home improvement retailer Home Depot had a stellar earnings report this quarter. Its performance skyrocketed its stock to a 52-week high. The company’s performance is yet another indication of the housing market’s recovery. And the optimism about the market is contagious.
Lawrence Yun, chief economist at the National Association of Realtors®, said recently that the industry is headed to a “multiyear housing recovery.”
Yun cited better job numbers, increased interest in investment and vacation homes, declining inventories and more relaxed credit score requirements for loans as reasons for a healthy market. Gone are the days when people were making a beeline for apartments, preferring to rent rather than buy.
According to the NAR, 51 percent of renters are qualified for a home mortgage. That’s up from 24 percent in 2005.
“Just looking at the financial qualifications, this means there are about 8 million more renters with the income necessary to buy a home now than in 2000, but they are choosing not to or are unable to become a homeowner,” Yun says.
Yun said that more renters will hit the housing market in the busy summer buying season.