The Real on Real Estate July 2016
U.S. Homes Sell at Strongest Pace Since 2007
Americans snapped up houses in May almost as soon as properties were listed, fueling the strongest sales rate in nearly a decade. Sales of existing homes rose 1.8 percent to a seasonally adjusted annual rate of 5.53 million, the highest level since February 2007, according to the National Association of Realtors.
People remain intent on buying homes, despite the low inventory of properties on the market that has caused prices to rise. The elevated demand likely stems from low mortgage rates and a relatively healthy jobs picture with unemployment at 4.7 percent, even with a recent slowdown in hiring.
"May's existing home sales numbers suggest that healthy demand continues to support a recovering housing market, but that inventory woes are preventing a full recovery to pre-recession levels," said Ralph McLaughlin, chief economist at online real estate firm Trulia.
Homes sold in May after just 32 days on the market, the fastest pace ever measured by the Realtors since they began tracking the figure in 2011. Homes stayed on the market on average for 40 days a year ago. The median home sales price was $239,700 in April, a 4.7 percent increase over the past 12 months.
The sales gains have failed to convince more current homeowners to list their properties. Many are still recovering equity lost during the crash. For some of them, a sale would fail to generate enough of a profit to cover the expense of buying a new home. The number of listings has fallen 5.7 percent from a year ago, meaning homebuyers have fewer and fewer options.
But Americans still want to own homes if they can afford it, according to a separate report released by the Harvard University Joint Center for Housing Studies. The pressures of student debt, rising rents and the leftover wreckage from the housing bust have restrained people's ability to buy, even though the dream remains alive.
Sales have been strong enough so far this year that the Realtors expect total sales to rise 3 percent from 2015, revising an initial forecast of nearly flat sales in 2016.
First-time buyers accounted for 30 percent of sales, well below the historic average of 40 percent
The Brexit Impact
The market is buzzing with news about Britain’s exit from Europe and the impact it has on the financial markets.
In terms of stocks and retirement, investors with heavy investments in the U.K. and Europe may be feeling a sting as U.S. stocks fell more than 3 percent but some European indexes fell over 12 percent.
Market experts say the initial market reaction was largely emotional. But they noted that Britain's separation from the EU could take several years to play out and urged investors not to sell out of fear. And some said investors may even want to take advantage of the dip to buy.
"For the typical U.S. investor this is not really going to change anything," said Jurrien Timmer, director of global macro for Fidelity Investments. "It's not going to affect the U.S. economy, it's not going to tip us into recession."
Whether it's the downturn in the stock market or the increase in global uncertainty, these events are a reminder of the need for a thoughtful financial plan, said Mark Hamrick, senior economic analyst for Bankrate.com. That means setting aside adequate savings and having a diversified portfolio.
If you don't have a financial adviser, look for information on the right investment choices for you with your retirement plan company.
Mortgage rates have been positive for homeowners. The Federal Reserve has been slow to raise interest rates due to concerns over global economic instability, and the U.K. vote makes it even less likely the Fed will act soon.
Anxious investors seeking the relative safety of U.S. bonds sent prices for the 10-year Treasury note sharply higher. In turn, that pulled the yield on the notes lower. Because long-term mortgage rates tend to track the yield on notes, mortgage rates may fall further.
"Mortgage rates are tumbling now and they're approaching record-low levels," said Greg McBride, chief financial analyst at Bankrate.com. "If you're a borrower, don't wait to lock your rate as this opportunity may not last long."
The Brexit could also indirectly benefit other borrowers if the Fed holds off on raising the central bank's key benchmark interest rate. When that rate goes up, it can raise short-term borrowing costs for banks, and that can ultimately lead to higher rates on things such as credit cards, home equity loans and credit lines.
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