Real estate sales in the US rose slightly in August but there are concerns that any rise in mortgage rates could flatten the market again. Analysts also point out that sales are still at an all time low.
Pending home sales rose 4.3% in August compared with July, according to the latest figures from the National Association of Realtors. The index, which is based on contracts signed, was 82.3 for the month, up from a downwardly revised 78.9 for July, yet 20.1% lower than a reading of 103 a year earlier.
NAR chief economist Lawrence Yun said historic low lending rates appear to be bringing buyers back to the market. But more jobs and an accompanying rise in consumer confidence are needed to keep the pace of recovery in home sales progressing, according to Yun.
‘Current low consumer price inflation has helped keep mortgage interest rates very attractive this year. However, recent rising trends in producer prices at the intermediate and early stages of production, along with very high commodity prices, are raising concerns about future inflation and future mortgage interest rates. Higher inflation would mean higher mortgage interest rates. In the meantime, housing affordability is hovering near record highs,’ he explained.
The index increased 5.2% in July from the prior month, when it rose 2.8% from May after plummeting nearly 30% from April. NAR attributed the drop in the spring to the ending of the federal homebuyer tax credit on April 30. Prospective homeowners who signed a sales contract by April 30 had until Sept. 30 to close the deal and still get the government credit of $8,000 for first time buyers and $6,500 for existing homeowners.
Regionally, the August pending-sales index was down 2.9% in the north east month on month and is now 28.8% below the year earlier. In the Midwest, the index was up 2.1% month on month but 26.5% compared with a year ago. Pending sales in the South rose 6.7% in August but is 13.1% lower than August 2009. In the West, the monthly index saw an increase of 6.4% from July but is almost 20% lower than the year earlier.
Prices are still falling according to the latest Altos Research 10-city composite index which fell 1.5% to an average median price of $465,968 in September. It means that in the last 14 months, prices have only increased month on month once in May when they edged up 0.2%.
Further price falls are expected, according to Altos. ‘As the market continues to correct, continued price decreases can be expected, likely until the early part of 2011, when the boost of the Spring market is felt,’ it said in its report.
Prices dropped the most in Phoenix, down 4.55%, San Francisco by 2.96% and there was a 2.53% fall in Dallas.
Inventory was down 2.24%, which, according to Altos, will soften the impact of weakening homebuyer demand in many markets. ‘While home prices are still falling, it is significant that there are fewer and fewer homes listed for sale. In fact, in only nine of the 26 markets that Altos follows in its monthly report were increases noted,’ the report says.