Existing-home sales climbed 2.5 percent from June to July and were up 0.6 percent year-over-year, according to the latest data from the National Association of Realtors. The continued decline in mortgage rates is pushing more would-be buyers into the market.
“Falling mortgage rates are improving housing affordability and nudging buyers into the market,” NAR Chief Economist Lawrence Yun said in a statement.
Despite the increase in sales, the supply of affordable housing is severely low, Yun said. That shortage is pushing up home prices. The median existing-home price in July climbed 4.3 percent year-over-year to pass the $280,000 mark. It’s the 89th consecutive month of year-over-year increases.
“Clearly, the inventory of moderately priced homes is inadequate and more home building is needed,” Yun said. “Some new apartments could be converted into condominiums thereby helping with the supply, especially in light of new federal rules permitting a wider use of Federal Housing Administration mortgages to buy condo properties.”
George Ratiu, senior economist for realtor.com, echoed Yun’s sentiments in a statement.
“As mortgage rates hovered near historic lows, buyers took notice and propelled home sales higher in July,” Ratiu said.
With lower rates and more millennials looking towards homeownership, inventory continues to tighten, according to Ratiu, which is pushing millennials out of high-cost cities.
“We are seeing buyers respond to existing market conditions by choosing to move from high-cost areas to more affordable cities,” Ratiu said. “The latest realtor.com report shows that mid-sized cities with strong economies, good weather, wide-ranging amenities and lifestyle choices, along with close proximity to large urban areas, are topping the list of desirable destinations for movers.”