According to an article in RisMedia, existing home sales are anticipated to finish strongly at the end of the year, reaching their highest pace since 2006. However there are concerns about rising mortgage rates and rising price growth which could slow down sales.
Apparently existing home sales are higher than a year earlier and figures strengthened in March due to more buyers entering the market at the start of the spring buying season. With interest rates still below 4% and sustained job growth, the demand for buying is steadily increasing. It’s particularly strong in parts of the country where economic activity and job growth is happening at a faster pace than the rest of the country including the states of Florida and Utah and the city of Denver.
Last year the rate of existing home sales fell slightly below 5 million but this year sales are expected to recover and steadily improve and it’s being predicted the year will end with a rate around 5.3 million. If this is proved to be correct it will be the highest seen since 2006 with figures expected to improve even more next year to 5.5 million. In addition the median existing home price is expected to rise by about 6% this year compared to 5.7% last year but will rise more moderately by 4% in 2016.
Although price growth is a good thing for homeowners still struggling to recover, increasing demand during the last few months is starting to affect affordability and there are concerns that price growth could reach unhealthier levels. This is because there isn’t any significant increase in the number of new and existing homes available for sale. The only exception to this is in the Northeast where price appreciation and contract activity have ground to a halt since the latter part of last year due to a weaker local jobs market and the slower economic growth.
Experts point out that housing supply needs to increase by quite an extent to satisfy the pent-up demand for home buying. Although there is a strong demand for the existing home market, the demand for single-family new home construction is still weak and because of this, home builders are tending to focus on multifamily rental housing. As a result, new construction for first-time buyers is only at about half of the long-term average due to a decline in homeownership and in marriage rates. In addition, homebuilders have been faced with increasing costs for building materials and difficulty in obtaining finance. It is expected that building activity will not return to normal levels until at least 2017.