Existing Home Sales up for 4th Straight Month

According to the National Association of Realtors (NAR), existing home sales increased 7.2% in July from the previous month – the first time home sales have been up for 4 consecutive months in over five years. This also marks the largest monthly increase since they began keeping track in 1999.

There have been several reports over the past 4 four months that suggest that the housing market is beginning to stabilize. Still, the amount of the increase was much higher than anticipated. And, it is the first time since November 2005 that existing home sales are higher than the previous year’s level.

The increase of home sales can be attributed to three main factors: 1) Housing prices are at their most affordable levels since 2003; 2) First-time homebuyers can receive an $8,000 tax credit for purchasing a home by November 30; and 3) mortgage rates remain at historically low levels. Lawrence Yun, NAR’s chief economist said, “The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales.”

Even with the good news of the last several months, we are not out of the woods. First-time homebuyers accounted for almost one out of every three home sales in July leaving many people worried about what will happen when the tax credit expires December 1st. Also, nearly one third of home sale were distressed property – short sales, foreclosures, etc. which can continue to drive home prices lower. And, unemployment is still at all time highs which can keep a lid on home sales going forward.