Home sales hit strong­est pace since early 2007

Daily Local News (West Chester, PA) - - BUSINESS - By Josh Boak

WASHINGTON >> Amer­i­cans bought homes in Oc­to­ber at the fastest pace in nearly decade, helped out by low mort­gage rates that have since started to climb fol­low­ing the pres­i­den­tial elec­tion of Don­ald Trump.

The National As­so­ci­a­tion of Real­tors said Tues­day that sales of ex­ist­ing homes rose 2 per­cent to a sea­son­ally ad­justed annual rate of 5.6 mil­lion. Sales reached their strong­est pace since Fe­bru­ary 2007, a sign that the mar­ket is still heal­ing from the col­laps­ing prices and fore­clo­sures that ig­nited the 2008 fi­nan­cial cri­sis.

A sta­ble job mar­ket and his­tor­i­cally cheap bor­row­ing costs have spurred de­mand from home­buy­ers this year. But sales growth has been tem­pered some­what by ac­cel­er­at­ing prices and a short­age of prop­er­ties on the mar­ket. Sales gains could pos­si­bly slow in the com­ing months as ris­ing mort­gage rates are mak­ing home loans more ex­pen­sive.

“Clearly, the mar­ket con­tin­ues to un­der­es­ti­mate just how much de­mand for homes is out there, even in the face of tight in­ven­tory and ris­ing ex­ist­ing home prices that are now the high­est on record,” said Svenja Gudell, chief econ­o­mist at the real es­tate firm Zil­low.

Fall­ing mort­gage rates helped boost sales for much of the year, but rates surged fol­low­ing this month’s pres­i­den­tial elec­tion. The in­crease means that yearly debt pay­ments for a me­dian-priced home would in­crease by more than $500 on av­er­age for peo­ple at­tempt­ing to buy homes in Novem­ber and De­cem­ber.

In­vestors ex­pect the fed­eral bud­get deficit to rise in a Trump ad­min­is­tra­tion, caus­ing the yield on 10year U.S. Trea­sury notes to reach roughly 2.3 per­cent.

The ris­ing in­ter­est rates trick­led into the hous­ing mar­ket. The av­er­age 30year, fixed-rate mort­gage climbed to nearly 4 per­cent from less than 3.5 per­cent at the end of Oc­to­ber. Few hous­ing ex­perts say that higher rates at this stage will fully dis­rupt sales, al­though it might cause some ex­ist­ing home­own­ers to stay in place rather than up­grade to new homes and costlier mort­gages. The impact of higher rates could be off­set if wages ac­cel­er­ate strongly dur­ing a Trump ad­min­is­tra­tion, giv­ing Amer­i­cans higher in­comes.

Still, the sup­ply crunch of the past year shows lit­tle sign of re­vers­ing it­self.

Sales list­ings have fallen 4.3 per­cent over the past year to 2.02 mil­lion homes. The short­age has pushed up the me­dian sales price of ex­ist­ing homes 6 per­cent from a year ago to $232,200.

The low mort­gage rates aided buy­ers with solid credit, al­though tighter lend­ing stan­dards ap­pears to have hurt po­ten­tial sales.

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