A new report from The Home Story presented by Fannie Mae states that though summer is normally a popular time to buy or sell a home, this season’s strong housing and economic data may make even better. The report cites Jonathan Smoke, chief economist at Realtor.com, in a piece he penned for CNBC.com, as saying this might be the “best summer for the housing market in a decade”.
The report also notes Smoke who states that low mortgage interest rates and an unemployment rate of 4.9 percent in July are some of the factors driving home sales. The report states that the unemployment rate remained at 4.9 percent in August, as reported by the U.S. Labor Department reported on September 2.
Additionally, Smoke says the employment report affirmed healthy economic fundamentals that support demand for housing. He also points to consumer confidence as a factor that favors those who want to buy a home, according to the report.
Fannie Mae’s report says that although additional data points for August are yet to come, Smoke says he believes the demand for real estate remained robust.
The report does note though that the total number of transactions continues to be held back by two key factors. Smoke is cited as saying these are limited supply and tight credit.
“Those factors are most significant in hot-but-high-cost markets like San Francisco, where we are seeing some cooling in demand. But even with some cooling, markets like San Francisco remain very hot relative to the rest of the U.S.,” says Smoke.
Affordable markets, especially in the Midwest and Southeast, are likely to see sales remain strong at least through August as frustrated buyers unable to find a home already this summer remain in the market while mortgage rates remain near all-time lows, he says.
The report states that Doug Duncan, chief economist with Fannie Mae, says in terms of level of home sales and construction, “There’s no doubt that if you look at the depth of the crisis, we’ve been on an uptrend.”
Additionally, the report states new residential sales reached an eight-year high in June. According to the Commerce Department, the report says this is increasing 3.5 percent to a seasonally adjusted rate of 592,000.
On August 16, the report says the Commerce Department reported housing starts increased 2.1 percent in July to a seasonally adjusted rate of 1.2 million units. This was the highest level since February.
Still, the limited supply of homes for sale is a major challenge, Duncan says according to the report. The supply of unsold inventory was 4.6 months in June, according to the National Association of Realtors. A “normal” unsold inventory supply is typically between six and seven months, he says.
“We’re not back to normal by any means,” Duncan says about the housing market. “The limited supply of starter homes means house prices are appreciating well above long-term inflation-adjusted pace and thus a headwind for first-time buyers.”