The National Association of Realtors said on Thursday existing homes sales in the U.S. jumped 4.7% last month to an annualized rate of 5.55 million units. The increase was more than the rise to 5.38 million units Wall Street has anticipated. Following August’s unexpected decline, existing home sales now increased year–over–year for 12 consecutive months, according to the National Association of Realtors, and all four major regions experienced sales gains in September.
“September home sales bounced back solidly after slowing in August and are now at their second highest pace since February 2007 (5.79 million),” Lawrence Yun, NAR chief economist said. “While current price growth around 6% is still roughly double the pace of wages, affordability has slightly improved since the spring and is helping to keep demand at a strong and sustained pace.”
Median existing home prices for all housing types in September came in at $221,900, which is 6.1% above September 2014 ($209,100). September’s price increase marks the 43rd consecutive month of year–over–year gains. Meanwhile, first–time buyers decreased to 29% of total sales in September, which is still relatively high, after climbing to their highest share of the year in August (32%). Last year at this point, first–time buyers accounted for 29% of all buyers.
“Despite persistent inventory shortages, the housing market has made great strides this year, backed by an increasing share of pent–up sellers realizing the increased equity they’ve gained from rising home prices and using it towards trading up or moving into a smaller home,” Yun added. “Unfortunately, first–time buyers are still failing to generate any meaningful traction this year.”
The NAR report comes as the composite National Mortgage Risk Index (NMRI) released Wednesday for Agency home purchase clocked in at 12.09% in September, up 0.8% once again on a year-over-year basis. The monthly composite gauge of the share of mortgage risk in the housing market has gained year-over-year in each month since January 2014.
According to Edward Pinto, a former executive vice president and chief credit officer for Fannie Mae, the continued migration of Agency loan originations from large banks to nonbanks in September and throughout the previous 12 months has accounted for much of the upward trend in the composite NMRI. Nonbank lending is substantially riskier than the large bank business it replaces.
“The cut in FHA’s annual insurance premium early this year has largely resulted in the purchase of higher priced homes, not increased accessibility,” said Pinto, now codirector of AEI’s International Center on Housing Risk. “This demonstrates once again how affordable housing policies tend not to increase affordability, and in many cases reduce it.”
Yet, the NAR, which doubles as the housing lobby on Capitol Hill, continues to lobby lawmakers for further government intervention aimed at propping up the housing market. NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark., says Realtors strongly back the passing of H.R. 3700, the “Housing Opportunity Through Modernization Act of 2015.” Polychron testified in support of the bill yesterday before the U.S. House Financial Services Subcommittee on Housing and Insurance.
“This bill helps expand homeownership and rental housing opportunities at all levels and specifically includes changes to Federal Housing Administration policies that limit the flexible and affordable financing needed by many potential condo buyers — especially first–time buyers.”
But Stephen Oliner, a senior fellow at UCLA’s Ziman Center for Real Estate and codirector of AEI’s International Center on Housing Risk, said these legislative measures have historically hurt the very people they claim to help.
“The typical first-time buyer today puts little money down and chooses a mortgage that pays off very slowly,” said Oliner. “This combination means that many first-time buyers are only one recession away from being significantly underwater.”
Regional Breakdown (H/T:NAR)
September existing–home sales in the Northeast jumped 8.6 percent to an annual rate of 760,000, and are 11.8 percent above a year ago. The median price in the Northeast was $256,500, which is 4.0 percent above September 2014.
In the Midwest, existing–home sales climbed 2.3 percent to an annual rate of 1.31 million in September, and are 12.0 percent above September 2014. The median price in the Midwest was $174,400, up 5.4 percent from a year ago.
Existing–home sales in the South rose 3.8 percent to an annual rate of 2.21 million in September, and are 5.7 percent above September 2014. The median price in the South was $191,500, up 6.2 percent from a year ago.
Existing–home sales in the West increased 6.7 percent to an annual rate of 1.27 million in September, and are 9.5 percent above a year ago. The median price in the West was $318,100, which is 8.0 percent above September 2014.