21 August 2013 17:32 [Source: ICIS news]
WASHINGTON (ICIS)--US existing home sales rose by 6.5% in July from June, the National Association of Realtors (NAR) said on Wednesday, but rising mortgage loan rates might put a bump in the road to full recovery for the housing market.
In its monthly report, the association said that existing home sales in July were at a seasonally adjusted annual rate of 5.39m homes, an advance of 6.5% from the downwardly revised June pace of 5.06m units.
Existing home sales data include single-family homes, town homes and condominiums.
In addition, said the NAR, July’s existing home sales were 17.2% better than in the same month of 2012, and monthly sales activity has remained above year-ago levels for 25 straight months.
But there are some concerns about whether the long-awaited US housing market recovery can be sustained or reach normal pre-recession levels.
NAR chief economist Lawrence Yun noted that “changes in affordability are impacting the market”, a reference to improving home prices and increasing mortgage loan rates.
“Mortgage interest rates are at the highest level in two years, pushing some buyers off the side-lines,” Yun said.
As home loan interest rates began to edge upward in the last year, some buyers rushed to make a purchase, thinking that rates might be higher later if they waited. That run of buyers helped boost the housing recovery, Yun said.
However, he added, “further rate increases will diminish the pool of eligible buyers”.
The rate for a conventional, 30-year, fixed-rate mortgage (FRM) rose to 4.37% in July from 4.07% in June, quite a strong one-month advance.
In July 2012, the 30-year FRM rate was 3.55%, so the cost of borrowing for a home loan has gained nearly a percentage point in one year.
On top of higher loan costs, the recovery itself has helped boost housing costs, with the median price for a home in July nearly 14% higher than a year earlier.
Monthly year-on-year gains in home prices have been continuous for 17 months, the NAR said.
But Yun sees “compensating factors that can sustain a continued recovery”.
“Although housing affordability conditions will become less attractive,” he said, “jobs are being added to the economy and mortgage underwriting standards should normalise over time from current stringent conditions.”
Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy
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