Existing-home sales jumped 25% in July from June, beating the prior record gain of 21% set a month earlier, as low mortgage rates fueled demand for real estate.
Sales of single-family homes, townhomes, condominiums, and co-ops rose to a seasonally adjusted 5.86 million, the highest level since 2006, the National Association of Realtors said in a report on Friday. The median price increased 8.5% from a year ago to $304,100, breaking through the $300,000 threshold for the first time.
“The housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic days,” said Lawrence Yun, NAR’s chief economist. “With the sizable shift in remote work, current homeowners are looking for larger homes and this will lead to a secondary level of demand even into 2021.”
The average U.S. rate for a 30-year fixed mortgage fell to a record low of 2.88% in the first week of August, the eighth time in 2020 the weekly rate has set a record in a Freddie Mac series that goes back almost five decades.
Lenders qualify applicants by the amount of the monthly payment measured against their income, and when financing costs go down the payment shrinks. That also means borrowers often find they qualify for larger mortgages, which means they can pay more for a property they want.
One sour note was a shortage of inventory that has plagued the market since 2019. It’s being made worse by the COVID-19 pandemic as some families who might have listed their properties put off a sale rather than open their home to strangers, said Yun.
Unsold inventory sits at a 3.1-month supply at the current sales pace, down from the 4.2-month figure recorded in July 2019, he said.
Properties remained on the market for an average of 22 days in July, down from 29 days in July 2019, the NAR report said. About 68% of homes sold in July 2020 were on the market for less than a month.
The low mortgage rates are pulling more first-time buyers into the market, Yun said. About 34% of sales in July were to people who were purchasing their first homes, he said. That’s up from 32% a year ago.