US home sales rebound in September after August slump

AP News
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Posted: Oct 22, 2015 11:11 AM
US home sales rebound in September after August slump

WASHINGTON (AP) — Americans snapped up more homes in September, suggesting that the U.S. housing sector remains insulated from global economic turmoil.

The National Association of Realtors said Thursday that sales of existing homes jumped 4.7 percent last month to a seasonally adjusted annual rate of 5.55 million. Buying activity rebounded after slipping in August, indicating that demand for housing continues despite a series of recent economic hits: stock market declines, falling factory orders, a slowdown in China, struggles in emerging nations such as Brazil and Turkey, and stagnation in Europe.

The real estate market appears to have reached a stable plateau in recent months, aided by mortgage rates near historic lows and steady job gains that have reduced the unemployment rate to a healthy 5.1 percent. Yet first-time buyers remain scarce and relatively few properties are being listed for sale, capping the potential growth of the sector.

"The report adds to the evidence that home sales, and housing activity generally, are trending up," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics. "The strength in housing has been offsetting weakness in manufacturing."

But any further acceleration in sales will depend on more properties coming up for sale.

Sales have advanced 8.8 percent over the past 12 months, while the number of listings has declined 3.1 percent. The housing market contains 4.8 months' supply of homes, significantly lower than the 6 months associated with a strong market.

Tight inventories have fueled rising home values. The median home sales price was $221,900 in September, a 6.1 percent annual increase.

The rising prices have created affordability pressures that could cap sales growth. Prices have increased at nearly three times the annual 2.2 percent increase in hourly average earnings.

All four geographic regions — Northeast, Midwest, South and West — experienced higher sales last month on a seasonally adjusted basis.

Yet first-time buyers are largely missing from the market.

Only 29 percent of sales last month went to first-time buyers, a percentage that continues to be significantly lower than the historical share of 40 percent. The younger millennial generation, ages 18 to 34, suffers from a shortage of down payment savings as they cope with lower starting salaries and high student debt loads.

A recent survey shows that 20 percent of millennials say they need financial help from their parents to buy a home, compared to just 8 percent of the older baby boomer generation who needed parental assistance, according to the finance company Credit Karma.

Buyers have benefited from low mortgage rates, offsetting some of the cost pressures.

The 30-year, fixed rate mortgage averaged 3.79 percent this week, substantially below the long-term average of 6 percent, the mortgage firm Freddie Mac said Thursday.