August Sees Jump in Existing Home Sales

It seems that there is a group of home buyers who can be lured back into the market by fire-sale prices. In August, sales of existing homes rose 7.7% to an annual rate of 5.03 million. That’s up from a rate of 4.67 million in July. Economists had predicted a smaller increase of only 4.7 percent for August.

It seems that home prices and mortgage rates have reached lows that many just can’t pass up. Last week, 30-year mortgage rates hit another record low. Home prices around the country are down more than 30% on average from the heady days leading into 2007. Add in the fact that there has been a little increase in the average family income, and you have a Trifecta. Low prices, record-low mortgage rates, and higher incomes have created the best housing affordability in decades.

Compared to a year ago, current existing home sales have surged by 18.6% from the very low 4.24 annual rate last year. In August, the median price of an existing home was $168,300, down 5.1% from a year ago. Many economists agree that there is a pent-up demand under these conditions, but that the extremely tight mortgage market is holding down any significant improvement in sales.

The National Association of Realtors’ Chief Economist, Lawrence Yun, says that investors have increased their activity significantly due to the bargain prices and tiny mortgage rates. He states also that many investors are buying as a hedge against inflation they perceive could be coming in the near to intermediate future.