On Thursday, October 27 the National Association of Realtors announced that pending home sales rebounded in September. The National Association of Realtors monitors a pending home sales index, and last month the index rose 1.5%. Many economists only expected a modest rise of 1%. In April of this year, the index reached its highest level in a decade. However, since then the number has fluctuated each month. Keep reading to learn more.
In general, home prices are high throughout the country. Yet it appears that many consumers are seeing job gains and therefore they feel comfortable purchasing homes. 90% of home buying activity comes from purchasing existing homes. That number peaked in June at an annualized rate of 5.57 million. That was the strongest monthly number since February of 2007. While sales dipped in July and August, the numbers rose to 5.47 million in September.
Buyers should be pleased to know that borrowing costs remain low. In September 30-year fixed-rate mortgages featured an average interest rate of 3.46%. Last year it was 3.89%. However, inventory remains tight, and that means that house prices are relatively high. This situation hurts new homebuyers more than it hurts existing homeowners. When it comes to down payments, existing homeowners are able to use the earnings from the sale of their previous home. First-time buyers don’t have this luxury.
As long as home construction remains low, housing prices will continue to remain high. The Commerce Department reported that last month builders broke ground at a rate that was 11.9% lower than last year. A pace that slow hasn’t been seen since March of last year. The good news, though, is that building permits are up. This is a sign that construction will pick up in the future. The other good news is that the US’s number of single-family homes that are under construction is nearing October 2008 levels. Builders remain unhappy with the cost of labor and land, and their complaints will likely stick around for the foreseeable future.
Many homebuyers are looking forward to next year. In October the National Association of Realtors released a survey that revealed that “52% of prospective buyers who visited [their] website are looking to purchase a home in 2017” (Yahoo Finance). Next year many millennials are expected to enter the market for the first time. However, like I mentioned above, first-time home buyers may still have difficulty securing a down payment for their dream home.