The long-awaited recovery of the housing market appears to have started, but it remains tentative and slow, according to a series of reports released at the end of August. Sales of new and existing homes are rising, and the numbers of foreclosures are dropping, as homebuyers take advantage of record-low mortgage rates.
“Mortgage interest rates have been at record lows this year while rents have been rising at faster rates,” Lawrence Yun, chief economist for the National Association of Realtors, said at a press conference. “Combined, these factors are helping to unleash a pent-up demand.”
Americans purchased 4.47 million homes in July, a 2.3-percent increase over the 4.37 million homes bought the month before, and more than 10 percent higher than number of purchases during July 2011, the association reported.
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Sales could be even better, the association predicted, if banks would loosen their lending requirements, and if Fannie Mae and Freddie Mac, the taxpayer-owned companies that play significant roles in the mortgage markets, released more of their foreclosed properties for sale. With these barriers lifted, sales could reach 5 to 5.5 million in 2013, the association predicted.
“(T)he market is constrained by unnecessarily tight lending standards and shrinking inventory supplies, so housing could easily be much stronger without these abnormal frictions,” Yun said.
Even without such changes, studies indicate that the housing recovery will continue, if slowly. More home sale contracts were signed in July than any month in the last two years, the association found, an early indication that final home sale totals will continue to grow over the next few months.
Such increased demand is finally beginning to have an impact on home prices. After years of decline and stagnation, the average sale price of an American home grew 6.9 percent during the second quarter of 2012, the first increase since September 2010, according to the Standard & Poor/Case-Shiller Home Prices Index.
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A few signs of lingering pain remain, however. The number of signed home contracts continued to fall in Western states in July. That’s because so few homes are available for sale, the association reported, due at least in part to the fact that so many homeowners in cities such as Las Vegas and Phoenix find that their home values are so deep underwater that many are refusing to sell until home values recover.
Additionally, applications for mortgages fell toward the end of August, according to the Mortgage Bankers Association. The drop was most significant in refinanced mortgages, which declined 5.7 percent during the third week in August.
Image: Chris Radcliff, via Flickr