Existing US home sales hit 8-year high in June

Washington

SALES of previously owned US homes climbed to an eight-year high in June as momentum in the residential real estate market accelerated.

Closings on existing homes, which usually occur a month or two after a contract is signed, climbed 3.2 per cent to a 5.49 million annualised rate, the most since February 2007, the National Association of Realtors (NAR) said on Wednesday. Prices rose to a record amid tight supply.

The housing market has picked up in recent months as more jobs, historically low mortgage rates and greater household formation boost demand. Faster wage growth will be needed to help housing continue its recovery and become a bigger contributor to growth this year.

"The housing market is on fire," said Thomas Costerg, a senior economist at Standard Chartered Bank in New York, who projected sales would rise to a 5.48 million pace. "The strength in housing could offset some of the weakness we are seeing elsewhere."

Compared with a year earlier, purchases increased 9.6 per cent in June on an adjusted basis.

The median price of an existing home rose 6.5 per cent from June 2014 to US$236,400, the highest on record before adjusting for inflation.

The number of existing properties on the market rose to 2.3 million in June compared with 2.28 million at the end of May. At the current pace, it would take five months to sell those houses compared with 5.1 months at the end of May.

The median time a home was on the market was 34 days, the fewest in records going back four years.

"The market is tighter compared to last year," Lawrence Yun, NAR chief economist, said in a news conference on Wednesday as the figures were released. "Home values are rising too fast and we need more supply to bring the price growth down, consistent with income growth." The real estate agents' group projects sales will total 5.26 million this year, the most since 2007.

The housing market has strengthened as of late, bolstered by a job market that's added almost three million workers to payrolls over the past year. At 5.3 per cent, the unemployment rate is bumping up against the level that Federal Reserve policy makers consider full employment.

Fed officials are monitoring progress in the economy as they consider when to raise their benchmark interest rate for the first time since 2006. In Congressional testimony last week, chair Janet Yellen said "homebuilding has picked up somewhat lately, although the demand for housing is still being restrained by limited availability of mortgage loans to many potential homebuyers". That makes it harder for them to take advantage of mortgage rates that remain at historically low levels. BLOOMBERG