WASHINGTON (AP) — Americans bought homes in June at the fastest rate in over eight years, pushing prices to record highs as buyer demand has eclipsed the availability of houses on the market.
The National Association of Realtors said Wednesday that sales of existing homes climbed 3.2 percent last month to a seasonally adjusted annual rate of 5.49 million, the highest rate since February 2007. Sales have jumped 9.6 percent over the past 12 months, while the number of listings has risen just 0.4 percent.
Median home prices climbed 6.5 percent over the past 12 months to $236,400, the highest level reported by the Realtors not adjusted for inflation.
Home-buying has recently surged as more buyers are flooding into the real estate market. Robust hiring over the past 21 months and an economic recovery now in its sixth year have enabled more Americans to set aside money for a down payment. But the rising demand has failed to draw more sellers into the market, causing tight inventories and escalating prices that could cap sales growth.
“The recent pace can’t be sustained, but it points clearly to upside potential,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
A mere five months’ supply of homes was on the market in June, compared to 5.5 months a year ago and an average of six months in a healthy market.
Some markets are barely adding any listings. The condominium market in Massachusetts contains just 1.8 months’ supply, according to a Federal Reserve report this month. The majority of real estate agents in the Atlanta Fed region – which ranges from Alabama to Florida- said that inventories were flat or falling over the past year.
Some of the recent sales burst appears to come from the prospect of low mortgage rates beginning to rise as the Federal Reserve considers raising a key interest rate from its near-zero level later this year. That possibility is prompting buyers to finalize sales before higher rates make borrowing costs prohibitively expensive, noted Daren Blomquist, a vice president at RealtyTrac, a housing analytics firm.
The premiums that the Federal Housing Administration charges to insure mortgages are also lower this year, further fueling buying activity, Blomquist said.
It’s also possible that home buyers are checking the market for listings more aggressively, making it possible for them to act fast with offers despite the lack of new inventory.
“Buyers can more quickly be alerted of new listings and also more conveniently access real estate data to help them pre-search a potential purchase before they even step foot in the property,” Blomquist said. “That may mean we don’t need such a large supply of inventory to feed growing sales.”
Properties typically sold last month in 34 days, the shortest time since the Realtors began tracking the figure in May 2011. There were fewer all-cash, individual investor and distressed home sales in the market, as more traditional buyers have returned.
Sales improved in all four geographical regions: Northeast, Midwest, South and West.
Still, the limited supplies could eventually prove to be a drag on sales growth in the coming months.
Ever rising home values are stretching the budgets of first-time buyers and owners looking to upgrade. As homes become less affordable, the current demand will likely taper off.
Home prices have increased nearly four times faster than wages, as average hourly earnings have risen just 2 percent over the past 12 months to $24.95 an hour, according to the Labor Department.
Some buyers are also bristling at the few available options on the market. Tony Smith, a Charlotte, North Carolina real estate broker, said some renters shopping for homes are now choosing instead to re-sign their leases and wait until a better selection of properties comes onto the market.
New construction has yet to satisfy rising demand, as builders are increasingly focused on the growing rental market.
Approved building permits rose increased 7.4 percent to an annual rate of 1.34 million in June, the highest level since July 2007, the Commerce Department said last week. Almost all of the gains came for apartment complexes, while permits for houses last month rose only 0.9 percent.
The share of Americans owning homes has fallen this year to a seasonally adjusted 63.8 percent, the lowest level since 1989.
Real estate had until recently lagged much of the six-year rebound from the recession, hobbled by the wave of foreclosures that came after the burst housing bubble.
But the job market found new traction in early 2014. Employers added 3.1 million jobs last year and are on pace to add 2.5 million jobs this year. As millions more Americans have found work, their new paychecks are increasingly going to housing, both in terms of renting and owning.
Low mortgage rates have also helped, although rates are now starting to climb to levels that could slow buying activity.
Average 30-year fixed rates were 4.09 percent last week, according to the mortgage giant Freddie Mac. The average has risen from a 52-week low of 3.59 percent.