Sales of previously owned homes reached 5.36 million sales on a seasonally adjusted annual basis and fell by 3.40 percent in October according to the National Association of Realtors®. Rising home prices and a shortage of available homes strained housing markets. Concerns over potentially higher mortgage rates may have sidelined home buyers as concerns over an anticipated rate hike by the Federal Reserve persisted. Many analysts expect the Federal Reserve to raise rates at its December meeting of the Federal Open Market Committee, which oversees the Fed’s monetary policy. Raising the target federal funds rate would cause consumer interest rates and mortgage rates to increase as well.
Shortage of Available Homes Could Lead to “Inventory Crunch” Next Spring
Lawrence Yun, Chief Economist for the National Association of Realtors®, cited concerns over the shortage of homes for sale. He said that a persisting shortage of available homes could lead to an inventory crunch during next spring’s peak selling season.
Home prices increased by 5.80 percent year over year to an average of $219.600. Rising home prices impacted decreasing sales in the West and South while home sales held steady in the Northeast, where home price growth was the slowest.
First-time Home Buyers Lag in Home Purchase Numbers
Although first-time buyers represented 31 percent of home buyers in October, which was a two percent increase over September’s participation, first-time home buyers usually represent approximately 40 percent of buyers of existing homes. First-time buyers are important to housing markets as they generate sales of homes by homeowners wishing to move up or relocate.
First-time buyers can be adversely affected by home prices and mortgage rates; a shortage of first-time buyers could create further slowdowns in home sales. There is good news due to steady job growth, which is important to those who are considering buying a home. Strict mortgage credit requirements are showing signs of relaxing and home builders are encouraged by current and future housing market conditions.
The National Association of Realtors® forecasts that 2015 sales of pre-owned homes at a level of 5.3 million sales, which would be the highest sales rate since 2007. Sales of existing homes are expected to rise by 3 percent in 2016, but mortgage rates and affordability will continue to influence actual sales and overall health of housing markets in the New Year.
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About the Author:
Babak Moghaddam graduated from University of Southern California in 1985. He entered the mortgage industry as a compliance auditor at the Bank of New York in 1986 and completed his masters in Business Administration two years later. After seventeen years in the traditional mortgage banking world Babak finally transformed this vision into his own practice in 2002 when he formed Charter Pacific Lending Corp, a mortgage company that has provided over $900 Million in residential real estate loans throughout Southern California. Babak and his team do things a little differently than other mortgage providers. They work as financial advisors, because they have come to realize that a mortgage is a very powerful financial tool. And just like any other financial tool, it should be managed as part of the overall financial management plan to reach every home owner’s long and short-term financial goals much faster. You can contact Babak for a free consultation and strategy session at (800) 322-1217 X103.