Jul 22, 2016

Low Rates Push Housing Market Closer to Potential

As per National Mortgage News , Mortgage rate push housing market closer to potential, Thanks to lower interest rates and higher job growth, First American Financial Corp. said in its latest Potential Home Sales model.

First American's model for June showed that the existing-home sales market is only underperforming by 0.3%, which equates to roughly 17,000 sales at a seasonally adjusted annualized rate. And the market for potential existing-home sales rose 0.19% month-over-month, or by 11,000 sales — though the figure remained 5.2% down from 2015.

Overall, potential existing-home sales increased to 5.66 million, just 542,000 off the pre-recession peak reached in July 2005.

While inventories remained constrained across the country, continuing the upward pressure on home prices, sales growth occurred nationwide, according to First American chief economist Mark Fleming. In the West, in particular, sales rose 5.4% from May, he said in a news release Wednesday.
"The silver lining for homebuyers is that the low interest rate environment continues to absorb some of the impact of rising prices through the benefits of increased leverage and buoyed home-buying power," Fleming said. "There is little indication mortgage rates will change course and start to rise, even in the face of potential rate hikes from the Federal Reserve later this year."

Fleming added that June's employment report, which found that the economy added 287,000 jobs in a reversal of May's disappointing numbers, added further positive news for the market.

"While one month of data does not make a trend, when you consider today's low mortgage rates, greater employment and rising wages, the housing market is settling on solid ground," he said.

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