Looks like the market is back on track with its strongest year since 2007 – sales of previously owned homes have experienced an increase in September on the heels of an unexpectedly weak August.
Existing home sales climbed 4.7% last month to a seasonally adjusted annual rate of 5.55 million, according to the National Association of Realtors. In August, stock market turbulence and uncertainty about interest rates may have caused some buyers to hold off on making purchases. But now, the market is seeing an upswing and this September increase puts the market on pace for its best year since before the recession.
According to Lawrence Yun, chief economist for the Realtors group, better job growth, continued low mortgage rates and pent-up demand are driving activity. Sales should record their best performance in eight years. Recovery is coming, but it’s a slow and steady process.
However, there is uncertainty about whether the US housing market can sustain its robust activity into next year. The pace of job creation slowed in September and the share of first-time home buyers fell to 29% of sales in September to 32% in August, something that is a big concern to economists. New buyers are vital to the long-term health of the housing market because they represent new demand.
Affordability is still an issue for young purchasers as an increase of college-educated professionals and a lack of new construction and existing inventory have helped drive up prices. Home prices are rising much faster than incomes, especially in the western region of the country.
The combination of rising prices and affordability constraints is beginning to weigh on the market. The strong market has inflated sellers’ expectations as 25% of homes on the market in September dropped their asking prices, up from 20% a year ago.
“Come spring of next year, based on the current trend, we find we could be facing a really tight inventory situation once the spring buying season returns, unless home builders really ramp up production,” Mr. Yun said.
Have you experienced the upswing in home sales? Are you concerned about the dwindling number of first-time buyers?
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