21 March 2013 17:35 [Source: ICIS news]
WASHINGTON (ICIS)--US sales of existing homes rose by 0.8% in February from January, the National Association of Realtors (NAR) said on Thursday, adding that “a healthy recovery is underway in the housing sector”.
January’s existing home sales originally had been estimated at 4.92m.
In addition, the association noted that February’s sales rate is 10.2% above the 4.52m-unit pace seen in February last year.
Average home prices in February were up by 11.6% from the same month in 2012, a gain that NAR said reinforces the recovery.
NAR chief economist Lawrence Yun said that a variety of economic conditions suggest that the housing recovery will continue.
“Job growth in the improving economy and pent-up demand are causing both home sales and rental leasing to rise,” he said.
“Though home prices are rising much faster than rents, historically low mortgage rates are still making home purchase affordable,” he added.
The recovery might be stronger, he said, except for “credit conditions that remain too restrictive”.
In the wake of the sub-prime lending scandal and the subsequent 2007 housing market collapse, mortgage banks have been reluctant to make home loans to anyone with less than top credit ratings and sufficient cash to make a large down-payment.
However, said NAR chairman Gary Thomas, continuing record-low mortgage interest rates – still below 4% for a 30-year fixed-rate loan – should help fuel the recovery going forward.
“In the history of mortgage interest rates since 1971, the 30-year fixed rate has been below 4% in only 15 months, and those have all been in the past 15 months,” Thomas said.
“Even with rising home prices, affordability remains historically favourable,” he added.
Increasing home prices aid the recovery because they help raise property values for those home owners who are “under water” on their mortgage loans, meaning that they owe more to the bank than their home is worth.
As more of those home owners see their property value rise above the mortgage debt balance, they are more likely to sell their existing home and buy a new or larger existing residence.
($1 = €0.77)
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