 Anyone still waiting for housing to bottom may want to peek in the
rear view mirror.The National
Association of REALTORS reported that August 2011 housing sales were 18.6%
higher than a year ago, crossing the seasonally adjusted annual rate of 5.03
million units sold.
Unlike
last year, when home buyers were frantically taking advantage of federal tax
incentives through June 2010, this year housing appears to be standing on its
own, despite considerable complications, including fears over the economy,
tight credit and low bank appraisals.
Among
the reasons housing sales are improving is affordability. Low interest rates
are retesting record lows and prices are 5.1% lower than a year ago –
temptations too strong to resist for home buyers and investors.
With
three out of four first-time home buyers and a quarter of repeat buyers living
in apartments before they purchased their homes, rents also played a role.
Two-thirds of Realtors reported rents rose in their areas during August. Rents
have been on the rise since Q4-2010.
But
momentum was not with all home buyers – real estate agents who were polled said
they had at least one contract cancellation (18% compared to 16% in July) due
to tight credit, tough appraisals, flood problems, or loan limit issues.
Temporary
conforming loan limit ceilings for Fannie Mae and Freddie Mac guaranteed loans
were still in effect in August, but some bankers would not honor the ceilings
if the transactions were due to close after October 1, 2011. In some high-cost
areas, conforming loan limits are over $100,000 lower.
Housing sales
remain well under the 2005 peak of 7.08 million homes sold, but affordability
should help housing continue its recovery. Existing sales are a true bargain;
at $168,300, they’re about $50,000 lower than median new homes, largely due to
high remainders of distressed homes in the market – about 31% of homes sold in
August.
Bargains brought
out the cash buyers – 29% of homes sold were bought with all cash. First-time
home buyers were 32% of the market, down from 50% in 2010.
When first-timers come back to about 40% of the market, the recovery
will indeed be in full swing.
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