Budding signs of recovery continued last month. The encouraging news arrived in a number of closely followed economic indicators. On Thursday, October 29, the U.S. Commerce Department stated the country's recession has officially ended, at least as leading data indicates.
U.S. GDP expanded 3.5 percent in the third quarter, the first period of quarterly growth in more than a year. A strong bounce in housing sales activity in September, mainly due to first-time buyers' efforts to claim the tax credit before it expires for November 30, pointed to stabilization in the housing sector. And more good news this week as an extension and expansion to the Home Buyer Tax Credit made its way through a congressional vote and has officially been signed into law by the President.
The recovery will continue to develop in small steps. The Recent Nobel Prize winner in economics, Paul Krugman, praised the progress, stating the most severe part of the crisis has now subsided and “the end of the world has been postponed.” Moving forward, trade imbalances and mounting levels of government debt, as well as high levels of unemployment, will need to be addressed. For now, governments including the United States will continue to provide stimulus support until the major economies are firmly on solid ground.
THE HOUSING MARKET
Existing Home Sales – Up over 9%
Existing home sales bounced back strongly in September with much of the increase being attributed to the rush of first-time buyers trying to claim the tax credit before the end of this month. Sales jumped 9.4 percent to 5.57 million units over August sales of 5.09 million, marking five gains in the past six months and is 9.2 percent above levels seen last year. Sales activity is at the highest level since July 2007 when sales hit 5.73 million.
Median Home Price
Existing-home price was $174,900 in September, 6 percent higher from its low in January but still 8.5 percent below September 2008. Distressed properties, which accounted for 29 percent of all transactions in September, continue to hold down the median price, as they typically sell for 15-20 percent less than traditional homes.
Inventory – Lowest in 2.5 years
The current housing supply is the lowest seen in two and a half years. Total housing inventory at the end of September fell 7.5 percent to 3.63 million existing homes available for sale, representing an 7.8-month supply at the current sales pace, down 16.1 percent from August’s 9.3-month supply. Compared to a year ago, there are now 15 percent fewer homes on the market. According to Lawrence Yun, NAR chief economist, “If we could continue to absorb inventory at this pace, home prices would return to normal, modest appreciation patterns next year.”
Mortgage Rates – Close to 5%
Rates for 30-year fixed loans continue to hover around 5 percent. While having risen above the ultra-low 4.78 percent reached in the spring, rates remain at attractive levels for people looking to buy a home or refinance. As an economic recovery is underway and concerns over inflation come back, experts expect mortgage rates will likely go up.
Affordability – Very favorable
Historically high affordability conditions coupled with the first-time buyer tax credit are boosting home sales. Home buyers continue to benefit from low home prices as well as unprecedented mortgage rates. “Potential first-time buyers can take heart in that affordability conditions this year are the highest on record dating back to 1970,” according to NAR President Charles McMillan. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 15 percent.
Sources: National Association of Realtors, Freddie Mac
Lori Wakefield is a REALTOR with Keller Williams - Lake Travis specializing in West Austin Real Estate - Lake Travis, Lakeway, Westlake, Waterfront and Luxury Homes
No comments:
Post a Comment