The National Association of Realtors announced today that existing home sales rose 2.4% in July. This represents an increase to 4.47 million units annually. While this number is still below the normal annual rate of 5 – 5.5 million, it does help to offset the drop of 5.4% that was seen in June. Although the number of sales rose, the median home prices slipped slightly by .8%.
The increase in sales in the month of July 2012 only helps the year over year increase. From July 2011 to July 2012 existing home sales are up 10.4%. This is the fifth month in a row for year on year increases even though January 2012 was the best month for sales, and the subsequent months have been up and down seemingly without reason. The period of July 2011 to July 2012 also saw median home prices rise by 9.4% to $187,300. Smaller inventories and fewer sales on lower priced houses have helped to increase the median home prices.
Increases in existing home sales are driven largely by the record low interest rate environment. The national average for a 30 year fixed rate mortgage is up slightly this week to 3.83%, while the national average for a 15 year mortgage is still hovering right about 3%. Combine these low interest rates with rising rental rates and closing costs that have dropped 7% in the last year, and it makes for a great time to purchase a home. While the housing market is still seeing numbers that are under the normal, this would pick up rapidly if banks would start lending. The banks are still leery about whom they will lend money to, and this is causing many potential home buyers to not be able to purchase a home now. That said, housing has become less of a part of the overall economy than it once was, with other sectors playing a more important role than they previously have played.
Unlike the new home sales report, this report includes only houses that have been previously constructed. The sale of single family homes, townhomes, and condos are all included. The report provides an accurate view of the direction of the economy and the housing market, and while it is understood that new home construction provides many jobs in the trade sectors, existing homes are just as important. The sale of existing homes provides an income to realtors, and when people purchase a house they will need to support many retail sectors to furnish and supply that house. The existing home sales report is issued by the National Association of Realtors once per month.