The median home
price has climbed 6.5 percent over the past 12 months to $236,400, the
highest level - unadjusted for inflation - reported by the Realtors.
Home-buying
has recently surged as more buyers have flooded 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, limiting the availability of homes and sparking higher
prices that could cap sales growth in the coming months.
"The
recent pace can't be sustained, but it points clearly to upside
potential," said Ian Shepherdson, chief economist at Pantheon
Macroeconomics.
Nationally, a mere five
months' supply of homes was on the market in June, compared with 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 Fed officials consider raising a key
interest rate from its near-zero level later this year. Past efforts by
the Fed officials to reduce their stimulus efforts have led to higher
mortgage rates, creating expectations that homebuyers will face
increased borrowing costs later this year.
That
possibility is prompting some 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 borrowers to
insure mortgages are also lower this year, further fueling buying
activity, Blomquist said.
It's also possible
that more homebuyers are aggressively checking the market for listings,
enabling 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," said Blomquist, adding that
this could help to explain why sales growth have dramatically outpaced
new listings so far this year.
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 last month in all four regions: Northeast, Midwest, South and West.
Still, the limited supplies could 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, demand will
likely taper off.
Home prices have increased
at more than three times the pace of wages. The average hourly wage has
risen just 2 percent over the past 12 months to $24.95 an hour,
according to the Labor Department.
Some
would-be buyers are also spurning their limited options on the market.
Tony Smith, a real estate broker in Charlotte, North Carolina, said some
renters shopping for homes are now choosing instead to re-sign their
leases and wait until a broader and better selection of properties comes
onto the market.
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 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 behind much of the six-year rebound
from the recession, hobbled by the wave of foreclosures that came after
the housing bubble began to burst roughly eight years ago.
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.
The
average 30-year fixed rate was 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.
By JOSH BOAK AP Economics Writer
