A half-hour into the trading day, the investment community received another encouraging report on the U.S. housing market when the National Association of Realtors, the nation’s largest trade association, reported an increase in existing home sales for the month of August. The sales data come on the heels of this morning’s decent news on housing starts and building permits for the same month.
Specifically, the latest report showed that existing home sales rose 7.8% sequentially last month, to a seasonally adjusted rate of 4.82 million. That was up 9.3% from the prior-year period. The report was yet another sign that the housing industry does appear to be in the midst of a durable recovery. The National Association of Realtors’ Chief Economist Lawrence Yun said, “The housing market is steadily recovering with consistent increases in both home sales and median prices. More buyers are taking advantage of excellent housing affordability conditions.”
In addition to the increase in existing sales, there were several other positive aspects to the latest report, most notably a continued uptick in home prices. The national median price was up 9.5%, year over year, in August, the sixth consecutive monthly advance and the strongest increase since January, 2006. Also, the number of distressed homes (i.e., foreclosures and short sales sold at deep discounts) accounted for 22% of the August sales, down from 24% in July and 31% in the prior-year period. Moreover, total existing homes inventory stood at 2.47 million at the end of August, which represents a 6.1-month supply at the current sales place—down from 6.4 months in July. The latter two data points are particularly pleasing, as a continuation of such trends would probably boost selling prices in the months to come.
Driving a lot of the recent demand for homes is record low mortgage rates. According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 3.60% in August. While affordability remains a big plus for the housing market right now, one major concern is the employment picture. According to the Labor Department, the nation added only 96,000 new positions last month, far less than the 200,000 positions likely needed to be created each month to make a significant dent in the nation’s unemployment rate, which remains at a stubbornly high 8.1%. If the labor market was to continue to flounder, it could slow the current recovery taking place in this long-suffering sector.
All in all, the latest existing home sales data have to be considered another very positive sign for the housing industry. It was encouraging to see home sales rise in all four regions of the United States. Especially noteworthy were the increases in the South (up 7.3% sequentially), and the West (+8.3%), the two biggest housing markets in the country. An improvement in the housing market would also be a big shot in the arm for the middling U.S. economy.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.