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Economists: Housing Poised to Turn Corner
Existing Home Sales Data Prompts Prediction


Existing home sales have improved so much in the last four months -- results in June easily beat a consensus forecast -- that some economists have predicted the housing industry will fully rebound in 2016.

Premature or not, recent existing home sales data has been so positive that the Wells Fargo Economics Group has declared 2016 a "breakout year" for the housing industry.

Sales in June soared 1.1 percent, versus May, to 5.57 million units, easily beating the consensus forecast. It was also the fourth straight month that existing home sales have risen sharply.

Year-over-year, June's rate of sales is up 3.0 percent, the highest level since February 2007, Wells Fargo's economists said.

First-time homebuyers contributed mightily to last month's superior gain, spurred in large part by consistently low mortgage rates.

Sales of both single-family homes and condominiums were up in June, but condo transactions eclipsed a mark not seen since May 2007.

"With resale sales activity and homebuilding posting strong gains, we can officially mark 2016 as the breakout year for the housing market," the Wells Fargo Economics Group said.

A possible downside to all the positive news concerns pending home sales, which are based on contract signings. Pending sales typically lead existing home sales by one or two months and have been trending lower.

The National Association of Realtors said the last four months of sales gains have been "impressive." "Existing sales rose again last month as more traditional buyers and fewer investors were able to close on a home despite many competitive areas with unrelenting supply and demand imbalances," said Lawrence Yun, chief economist for the NAR. "Sustained job growth as well as this year's descent in mortgage rates is undoubtedly driving the appetite for home purchases."

The share of first-time buyers jumped to 33 percent in June, up from 30 percent in May, and nearly eclipsed a record of 34 percent set in July 2012. "Through the first six months of the year, first-time buyers have represented an average of 31 percent of buyers; they were 30 percent in all of 2015," the NAR said.

More first-time buyers are looking to purchase homes because mortgage rates are now at all-time lows. This could be an indication that more affordable, lower-priced homes are beginning to make their way into the marketplace, Yun said.

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July 22, 2019, 8:44 pm PDT

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