U.S. home sales surged to their highest level in nearly 14 years in August as the housing market continued to outperform the broad economy, though record home prices could be an obstacle for first-time buyers.
The National Association of Realtors said on Tuesday that existing home sales increased 2.4% to a seasonally adjusted annual rate of 6 million units last month, the highest level since December 2006. Data for July was unrevised at 5.86 million units. Last month’s increase in homes sales was in line with economists’ expectations.
Sales last month concentrated on the upper price end of the market. Existing home sales, which account for the bulk of U.S. home sales, jumped 10.5% on a year-on-year basis in August. Sales increased in all four regions.
The housing market has remained resilient despite nearly 30 million people being on unemployment benefits. Unemployment has disproportionately affected low-wage workers in the services sector, who are typically young and renters.
Housing is being fueled by record low interest rates and a pandemic-fueled migration to suburbs and low density areas. The 30-year fixed mortgage rate is around an average of 2.87%, according to data from mortgage finance agency Freddie Mac.
The government reported last week that single-family homebuilding, which accounts for the largest share of the housing market, increased in August, with building permits surging to their highest level since May 2007. Single-family homebuilder confidence hit a record high in September.
Supply remains a headache. There were 1.49 million previously owned homes on the market in August, down 18.6% from a year ago. With inventory tight, the median existing house price jumped 11.4% from a year ago to a record $310,600 in August.
At August’s sales pace, it would take 3.0 months to exhaust the current inventory, down from 3.1 months in July and 4.0 months a year ago. A six-to-seven-month supply is viewed as a healthy balance between supply and demand.
Reporting by Lucia Mutikani; Editing by Paul Simao