US home purchases rebound; 2015 had most sales in 9 years

by 26 Jan 2016
The National Association of Realtors said Friday that sales of existing homes climbed 14.7 per cent last month to a seasonally adjusted annual rate of 5.46 million. Sales had previously plummeted as the industry adapted to new mortgage disclosure rules _ a temporary downturn before delayed sales were finalized in December.

"This is a great way to cap off 2015," said Jennifer Lee, a senior economist at BMO Capital Markets.

Last month's rebound concluded a year that produced the highest annual sales total since 2006. Steady job growth and low mortgages drew more buyers into the market, causing both sales and prices to climb.

Americans bought roughly 5.26 million homes in 2015, a 6.5 per cent increase over 2014. The median sales price rose 6.8 per cent to $222,400.

The Realtors forecast that sales will stay flat in 2016 and that the median price will rise more than 4 per cent. A price increase that big would compound a problem for many would-be buyers: A rising proportion of homes are unaffordable. Home values rose last year at more than twice the pace of pay.

Despite greater demand, the housing market continues to recover slowly from the bursting of the housing bubble more than eight years ago. Sales remain well below their peak of 7.08 million in 2005, when adjustable-rate mortgages with no money down and other risky loans fueled a buying frenzy that eventually fizzled and triggered the worst downturn since the Great Depression.

More traditional buyers returned to the market last year as cash investors pulled back. But the number of listings shrank, giving those shopping for a home fewer options and causing prices to rise.

The number of listings on the market fell 3.8 per cent from a year ago. Many current homeowners are unable to sell their properties for enough of a profit to afford another home, causing them to stay on the sidelines. With available homes in short supply, more would-be buyers are stuck renting. The share of homeowners has slipped to 63.7 per cent from a high of 69.2 per cent in 2004.

Demand has continued even though sales dipped to an annual rate of 4.76 million in November. That decline resulted in large part from the Consumer Financial Protection Bureau's introduction of guidelines in October for informing homebuyers about interest rates and fees for their mortgages.

Once lenders and buyers sorted through the changes to the paperwork, sales growth resumed. In December, sales surged in the Northeast, Midwest, South and the West, with the Western states recording a dramatic 23.2 per cent increase.

Sales have been supported by a relatively healthy job market. Employers added a robust 2.7 million jobs last year as the unemployment rate dropped to 5 per cent from 5.7 per cent. Pay growth has been relatively tepid, but average hourly earnings have still improved 2.5 per cent from a year ago to $25.24.

Low mortgage rates have also helped with affordability. Mortgage buyer Freddie Mac says the average rate on a 30-year fixed-rate mortgage declined to 3.81 per cent this week from 3.92 per cent a week earlier. The average rate has increased from its 3.63 per cent average a year ago but remains well below its historic average of 6 per cent.

Josh Boak


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