U.S. existing home sales near 14-year high; prices race to record peak
WASHINGTON (Reuters) – U.S. home sales surged to their highest level in nearly 14 years in August as the housing market continued to outperform the overall economy, though record-high home prices could squeeze first-time buyers out of the market.
The report from the National Association of Realtors confirmed the housing market had recovered after slumping when the economy almost ground to a halt as businesses were shuttered in mid-March in an effort to slow the spread of COVID-19.
Demand for housing is being fueled by record-low interest rates and a pandemic-fueled migration to suburbs and low-density areas in search of more spacious accommodation as many people work from home. Though the coronavirus crisis has left nearly 30 million people on unemployment benefits, joblessness has disproportionately affected low-wage workers in the services sector, who are typically young and renters.
Existing home sales increased 2.4% to a seasonally adjusted annual rate of 6 million units last month, the highest level since December 2006. August’s increase in homes sales, which marked three straight months of gains, was in line with economists’ expectations.
The median existing house price jumped 11.4% from a year ago to a record $310,600 in August. Sales last month were concentrated in the $250,000 to $1 million and over price range, with transactions below the $250,000 price band declining sharply.
Existing home sales, which account for the bulk of U.S. home sales, jumped 10.5% on a year-on-year basis in August. Sales increased in all four regions.
Stocks on Wall Street were trading lower. The dollar rose against a basket of currencies. U.S. Treasury prices fell.
The 30-year fixed mortgage rate is around an average of 2.87%, according to data from mortgage finance agency Freddie Mac. The government reported last week that single-family homebuilding, which accounts for the largest share of the housing market, increased in August, with building permits surging to their highest level since May 2007. Single-family homebuilder confidence hit a record high in September.
Supply remains a headache. There were 1.49 million previously owned homes on the market in August, down 18.6% from a year ago. At August’s sales pace, it would take 3.0 months to exhaust the current inventory, down from 3.1 months in July and 4.0 months a year ago. A six-to-seven-month supply is viewed as a healthy balance between supply and demand.
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