U.S. home sales in August rose to their highest level in six years, even higher than during the recent home buyer tax credit. This news came on the heels of the Federal Reserve’s announcement that it would continue to fuel the mortgage market, keeping rates from rising dramatically. Still, Realtors were uncharacteristically pessimistic in their predictions for sales this fall.
“We are getting early signals from lock boxes that show a significant change in direction in August,” said Lawrence Yun, chief economist for the National Association of Realtors, referring to the small key boxes that hang on the doors of for-sale homes. The number of times they were opened in August dropped dramatically, signaling a big drop in potential buyer traffic.
Yun claimed the jump in August sales was based on fear of rising rates. August numbers are based on closings for contracts that were likely signed in June. June saw the biggest spike in mortgage interest rates.
“That hurried people into making a decision,” said Yun. “It was the last hurrah for the next 12 to 18 months.”
Realtors say home buying today is less about the interest rate and more about the ability to get the mortgage. Sales are also hampered by a severe lack of listings, down 6 percent from a year ago. Inventory shortages are nationwide with some markets seeing less than a month’s supply of homes for sale.
While sales may fall, it appears home prices will continue to gain, if at a slower pace than recent months. Fewer foreclosures and, again, the lack of inventory, will prevent prices from falling. Borrowers are falling behind less and actually changing their behavior when it comes to paying their mortgages.
“For the first time since the housing bubble, consumers with constrained liquidity are making their mortgage payments about as much as their credit card payments,” said Steve Chaouki, co-author of a new study from TransUnion.