Real Estate Update – What’s happening in the Housing Market

Recently released reports show that July new home sales were down over 13% month to month, but existing home sales increased a healthy 6.5%.  Why there is such a big difference? The reason is that new home sales are based on signed contracts in July and the existing home sales numbers are based on closings which were contracts signed in May or June.  One factor for this difference is rising mortgage rates which jumped from 3.5% to 4.5% between May and July and made buying a home 15% more expensive.  This rising expense is just calculating the increased mortgage rate, not the rising prices of homes.  Lender Processing Services calculates that prices have increased nationally by 8.4% from last year.  The S&P Case Shiller Index calculates the increase at 12.2%.  Rising rates plus rising home prices are beginning to effect the ability to buy a home for some home buyers.  It is even beginning to effect the investor market.  Investors who have been bolstering many markets, accounted for only 16% of the sales in July, down from 22% in February.  First time home buyers, who may be feeling the effect of these higher home prices and higher mortgage rates, historically account for around 40% of home sales. In July, first time home buyers only accounted for 29% of the home sales.  If mortgage rates level off and the current administration continues to focus on making housing a priority for the ailing economy, then home sales should continue on a steadier pace.  However, if rates keep increasing along with prices, the housing market will be negatively impacted.  Have questions about the market or any real estate questions in general?  Contact the 865 Real Estate team today!