The recent weakness in the housing market could reverse, thanks to a sharp fall in mortgage interest rates.
Consumers have signed more contracts to buy existing houses than expected in June. The so-called pending home sales increased 2.8% compared to May, according to the National Association of Realtors. Turnover was 1.6% higher compared to June 2018, the first annual profit in 17 months. Signed contracts are an indicator for closed home sales within one to three months.
“Job growth is doing well, the stock market is almost always high and home value is constantly rising,” wrote Lawrence Yun, chief economist of the NAR in a release. “When you combine that with the unbelievably low mortgage rates, it is not surprising to see two consecutive months of increases now.”
Mortgage interest rates fell sharply in May and June. The average rate for the 30-year fixed mortgage was 4.29% on 1 May and ended June at 3.81%, according to Mortgage News Daily. That improved affordability, but apparently not enough. House prices are high and still win in most major markets. House price increases rose in May in seven key markets, according to the latest S&P Case-Shiller house price indices.
“If mortgage rates are close to recent lows, we could see prices rising again due to improved affordability and the possibility of more limited inventory,” said Danielle Hale, chief economist for Realtor.com.
The supply of homes for sale has increased most of this year, but flattened out in June. Some predict that the inventory will be lower again this fall. This creates more competition in the market.
“Selling houses at breakneck speed, in less than a month, on average for existing houses and three months for newly built houses,” Yun said. “The equity of homeowners has doubled in the last six years to now almost $ 16 trillion. But the number of potential buyers exceeds the number of available houses. We need to see a significant increase in inventory, especially for entry-level homes, to ensure wider access to home ownership. “
Regionally, the real estate broker’s index of sales rose 2.7% in the northeast from month to month and was 0.9% higher than a year ago. In the Midwest, the index grew monthly by 3.3% and annually by 1.7%. In the South, the index rose by 1.3% per month and 1.4% per year. In the West, current revenue increased 5.4% monthly and was 2.5% higher than a year ago.