News for the housing industry continues to deliver upbeat data. Existing-home sales, new housing starts, and permits increased in August. The National Association of Realtors reports that occupied-home sales grew at a year-over-year pace of 7.8%. This calculates to a seasonally adjusted annual rate of 4.82 million units and 4.47 million units compared to July.
The existing-home sales figure represents a 9.3 percent increase over the 4.41-million rate in August. The last time the real estate market approached this high an activity level was May 2010.
In addition, U.S. builders prepare ground for the most new home foundations at a pace unseen since April 2010.
A combination of affordable real estate prices, super-low mortgage interest rates, and low inventory of new homes, real estate agents and builders have experienced more foot traffic from buyers.
Two other factors that contribute to an improved housing market are fewer foreclosures and short sales on the market and gains in home prices.
Existing-Home Sales at Two-Year High
Data for existing-home sales exceeded the median figure, 4.56 (versus 4.82 million), estimated made by the 78 economists polled by Bloomberg News. The existing-home sales indicator includes data from completed transactions involving single-family homes, condominiums, co-ops, and townhomes.
According to the chief economist of NAR Lawrence Yun, the housing market is “steadily recovering.” Yun describes most regional housing inventories as “balanced, favoring neither seller nor buyers.”
Nationally, the inventory of available homes for sale sits at a 6.1 month supply versus 6.4-month inventory in July and 8.2 month supply in August 2011. The median sale price for existing homes rose to $187,400 in August – the strongest gain since January 2006 when median home prices increased 10.2 compared to January 2005.
Nonetheless, some markets in the West (California, Nevada, and Arizona) and Florida face a shortage of homes. These states happened to suffer the most after the housing market collapsed – with the highest foreclosure rates and property values declining 50 percent or more off peak prices.
New Homes and Permits
The U.S. Commerce Department stated in its release that home builders started building foundations for an annual rate of 750,000 homes in August. This represents an increase of 29.1% over August 2011. The figure includes single-family homes, townhouses, and multi-family apartment buildings. Single-family units make up over 71% percent or 535,000 of the new ground-breakings, an annual rate of 5.5%.
In July, applications for building permits reached a four-year high of 811,000. Building permits indicator declined to an annual pace of 803,000 applications in August. Applications for single-unit homes increased 0.2 percent to a yearly rate of 512,000 units. Housing market analysts monitor building permits, which provide insights into future new construction activities and the strength of the general economy.
Builders More Confident
Builders revealed continued bullishness about the housing market in a recent survey. Respondents to the poll recorded the highest level of confidence in six years, according to the National Association of Realtors/Wells Fargo.
Although new home sales comprise about one-fifth of total home sales, it constitutes a key driver of the economy. The National Association of Home Builders (NAHB) reports on its website that one new home contributes $90,000 in tax revenue to local and state economies and creates nearly three jobs for a year.
In addition, other segments of the economy benefit, including appliance manufacturers, furniture makers, and an array of other industries
Mortgage Interest Rates Falling
The Federal Reserve announcement that it will implement another round of quantitative easing (QE3) assure borrowers looking to complete a mortgage refinance or buy a home that they will have an extended period to take advantage of low interest rates.
According the Freddie Mac weekly survey, the average interest rate for a 30-year fixed-rate mortgage decreased to 3.49% -- equaling its lowest rate in history, compared to 3.55% the prior week. The 15-year fixed-rate product dropped to a new low of 2.77% compared to 2.85% the last week.