Existing home sales rose in May to the highest pace since November 2009, when buyers were rushing to make a tax-credit deadline, pointing to a continuing recovery. Existing-home sales rose 4.% in May to a seasonally adjusted annual rate of 5.18 million. These sales were 12.9% higher than during the same period in the prior year. Polled economists had expected the pace of existing home sales to hit a rate of 5 million in May compared with an April rate of 4.91 million.
This report provides further evidence that the housing market is on a firmly improving trend. Meanwhile, the median existing home price hit $208,000 in May, the highest since 2008, with low inventory supporting prices. The median price is up 15.4% from the same period in the prior year, the largest growth since 2005.
Analysts say the housing market’s gains over the past year could have been even larger if inventories were greater. Still, economists expect housing demand to continue to grow along with the U.S. economy. As home prices continue to rise, more buyers are likely to be able and willing to put their homes on the market. Rising prices also induce buyers to bid before prices get too high. However, the NAR said prices are rising too quickly and more construction is needed.
Low interest rates have been fueling demand. While rising rates will curb demand among some buyers, they could also spur others to quickly enter the market to take advantage of high affordability.
Given the massive rise in mortgage rates in recent weeks, we expect the pace of positive momentum will likely slow in the coming months, though the initial reaction could be for some buyers to move into the market as they try and lock-in the lower rates. Despite their recent climb, rates remain relatively low. In terms of monthly payments on an average house, the change in mortgage rates we’ve seen so far is not all that dramatic. Americans view on the housing market recently hit a multi-year high, with large shares saying that now is a good time to buy and sell homes.
To keep track of the market in your Seattle neighborhood, check out Team Troy’s Market Insider – it will tell you if what we are seeing on the National scale is happening in your area: http://www.bellevueseattlehomes.com/mimarket/zip/98188/
*Excerpted from the Economic Report by Ruth Mantell, MarketWatch, Wall Street Journal