Powerful new evidence shows that the U.S. housing market has a lot of healthy momentum in its favor. Homebuyers continue to benefit from low interest rates, and, according to a recent report, sales of newly built homes increased at a strong pace throughout the first half of this year.
The Commerce Department report found that sales for single-family residences rose 10.1 percent in the first half of 2016 compared to the opening six months of 2015. And Commerce Department officials aren’t the only ones with a positive outlook on the housing market.
Rob Martin, a Barclays economist, recently sent out a note to clients claiming that the buoyant housing market is likely to continue to support both volumes and prices over the medium term.
Looking just at June 2016, sales were up more than 3 percent. The seasonally-adjusted sales rate rose to 592,000, which was the highest pace since before the crisis of 2008. Compared to June 2015, sales were up a staggering 25.4 percent.
In May, housing experts responding to a Wall Street Journal survey predicted an adjusted sales pace of only 559,000 for June. The previous month’s estimate of 551,000 was also off (actual sales clocked in at 572,000).
Sales of newly-built homes are on the rise, but the pace of new home purchases and home construction still lags behind what we’ve seen in past economic expansions. New construction also happens to be a very small portion of the market, accounting for only 10 percent of overall home sales.
Most purchases are for previously owned homes, and those transactions are up 1 percent to a seasonally-adjusted pace of 5.57 million — the highest mark since the financial crisis.
The housing sector is providing plenty of fuel for the economy as a whole. As American economic growth has sailed ahead in the past few years, home purchases have been one of the steady tailwinds making it possible.
According to the Commerce Department report mentioned earlier, investment in residential housing is responsible for more than .5 percent points of the overall 1.1 percent growth in overall GDP in the first quarter of 2016.
Many experts believe that home sales continue to be boosted by low interest rates. In June, the average 30-year fixed-rate mortgage rate was 3.57 percent, a drop from an average of 3.98 percent measured in June of 2015.
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