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AEI: Home sales reach post-recovery high

The U.S. housing market has been doing better than has been suggested by a string of gloomy recent industry reports, according to new sales tracking data from American Enterprise Institute’s Center on Housing Markets and Finance.

Total existing- and new-home sales totaled 6.37 million in the 12 months through June, which is a post-recovery high and up 2.6 percent over the same 12 months through June 2017, AEI reported.

salesaeidata“The U.S. housing market remained quite solid in 2018 quarter two,” said Ed Pinto, the co-director of the Center on Housing Markets and Finance. Pinto said the volume of financed home purchases was up 1.9 percent year over year in the second quarter — a solid gain in purchase activity for the mortgage market that has been masked by the steep decline in refinances.   

“When you hear about the slowdown in originations in the mortgage marketplace, you are really talking about the slowdown in the refi market, not particularly in the home-purchase market, which continues to go up, albeit at a slower pace,” Pinto said.

The data does suggest the home-purchase market hit a plateau in the second quarter, however. Overall sales, which include existing and new homes, have been steadily rising since the midway point of 2014.

The growth in sales leveled off around the third quarter of 2017,  according to AEI. The findings are consistent with industry and U.S. Census Bureau data that suggests existing-home sales have run slightly behind last year’s pace in 2018, but new-home sales are increasing with an uptick in starts.

Overall sales transactions in the second quarter  were up by just 20 basis points, compared to the same quarter in 2017.

Pinto said the market has been stressed by rising home prices and too many buyers chasing too few affordable houses. AEI believes that almost all the major markets in U.S. West region are overvalued, and the prices are unsustainable in terms of the median sales prices relative to the median income in those markets.

“Houses prices are overvalued in most of the markets in the country, and all of the usual suspects,” Pinto said. “The data we just presented also suggests that prices are going up much faster than incomes, particularly on the low end. We know that the bottom half the of the market is largely a first-time buyer market, and those house prices are going up much more rapidly, and more rapidly than incomes.”

In the first quarter of 2018, AEI’s home-price index of 73 metro areas rose year over year by 7 percent, but was up 8.2 percent annually at the lower tier.


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