Home sales are on the rise as retail mortgage costs begin to fall following two reductions in the target cash rate by the Federal Reserve.
The latest cut takes the target rate to 3.75%-4%, and this could influence the real estate market significantly in the coming weeks.
Americans responded to the first reduction with a 1.5% increase in the sale of existing homes in September compared with August.
Freddie Mac reported the average 30-year fixed-rate mortgage in September was 6.35%, a significant drop from 6.59% in August. This decline should accelerate now.
Two other factors will be giving owners confidence – values have increased 4.1% year-over-year and the median price is $415,200 – a 2.1% annual rise.
Twelve months ago, the average price stood at $406,700. The US has now registered 27 months of year-over-year price increases.
In another sign of increasing confidence, more homes are coming on the market. This has led to a 1.3% increase in unsold inventory. Significantly, there are now 14% more homes – 1.36 million – on the market than last September.
The National Association of Realtors (NAR) says there are 1.55 million homes for sale – a five-year high. It would take 4.6 months to sell these based on current demand.
It’s taking a little longer to finalize deals, however. The average time a home sits on the market stands at 33 days, compared with 28 days last year. This happens when supply increases and buyers have more choice.
Interestingly, some 30% of those buyers are first homebuyers, indicating a strong demand at the entry-level tier. Some 15% of transactions were conducted by investors. The number of second-home buyers dropped 16% compared with 12 months ago.
Demand for single-family homes continues to increase. There was a 1.7% rise in deals in September. Year-over-year, sales have increased 4.5% to an annual rate of 3.69 million. The median price is $420,700 – a 2.3% jump from last year.
Results were a little flat for condos and townhomes. There was no change in the volume of sales between August and September, recording 370,000 deals. The median price is down slightly (-0.6%) to $360,300.
In our neighborhood, it’s important to speak to an experienced agent such as myself to understand the trend in values for both homes, apartments and condos. I’d be delighted to guide you.
NAR Chief Economist Dr. Lawrence Yun said: “Improving housing affordability is contributing to the increase in sales.
“Inventory is matching a five-year high, though it remains below pre-Covid levels. Many homeowners are financially comfortable, resulting in very few distressed properties and forced sales. Home prices continue to rise in most parts of the country, further contributing to overall household wealth.”