Cheaper mortgage rates and improved job market ‘unleash pent-up demand’ as economists think the crisis may be easing.
US home sales and prices rose moderately in July amid signs that the worst housing crisis in living memory may be coming to an end.
According to the National Association of Realtors (NAR) existing home sales rose 2.3% to an annual rate of 4.47m units last month, a figure just below analysts’ expectations. The median price for a home resale nationwide was $187,300 (£118,500) in July, 9.4% higher than in the same month a year earlier.
“Mortgage interest rates have been at record lows this year,” said NAR chief economist Lawrence Yun. He said that low rates combined with signs of improvement in the job market were “helping to unleash pent-up demand”.
The collapse of the housing market is seen by economists as the most significant drag on the wider US economy. On Monday President Barack Obama said there were signs it was “beginning to tick up” again. But it remains extremely weak in states including Florida that are vital to his re-election campaign.
Housing expert David Blitzer, chairman of the index committee at S&P Dow Jones Indices, said the news was “encouraging”. Last month the S&P Case Shiller home price index reported US home prices rose 2.2% in May over April.
“This is one more piece of data that suggest the recovery is for real,” he said. He said areas of weakness remained and too many people were stuck in homes they cannot sell because they are worth less than they paid for them. “But even in places like Las Vegas and Phoenix, which were very badly hit, things are much better,” he said.
Ken Goldstein, economist at the Conference Board, said the figures suggested a floor had now been put under the housing market.
“The housing market is the critical factor in this recovery,” he said. “This looks like real change. Recovery in the housing market will be the critical factor in recovery in the jobs market, which will be the critical factor in consumer confidence and consumer spending,” he said.
Goldstein said the figures suggest more people are now managing to negotiate “the maze of mortgage applications”. Lending criteria were tightened massively after the housing boom exposed shoddy practices across the industry. He said it now appeared that lending was moving back toward more normal standards.
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