Home Sales on the Rebound despite Affordability Concerns

Accordingly to Lawrence Yun, chief economist of the National Association of Realtors®, existing-home sales are expected to finish the year at their highest pace since 2006, but accelerating price growth and rising mortgage rates have the potential to slow sales. Existing-home sales are measurably higher than a year ago, and strengthened in March when more buyers entered the market as the spring buying season got underway. The sustained job growth and interest rates below 4 percent have been the catalyst behind the improvement in sales.

Yun expects home sales to steadily improve, ending up at a pace around 5.30 million (the highest since 2006) this year and 5.5 million in 2016. Yun also expects the national median existing-home price to rise to around 6 percent this year (5.7 percent in 2014) before moderating to 4 percent in 2016.
On the topic of home prices, Yun says increasing demand in recent months, without meaningful gains of new and existing-homes available for sale, is starting to negatively impact affordability and is pushing price growth to unhealthier levels.
Unlike the existing-home market, demand for single-family new home construction remains weak. Yun is forecasting housing starts to come in around 1.1 million this year and reach 1.4 million in 2016, which he says is still below the 1.5 million needed each year to keep up with the underlying demand. New-home sales are likely to total 570,000 this year, and increase to 720,000 next year.

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