After a period in the doldrums, home sales have bounced back strongly throughout the United States. Sales of existing homes jumped 9.4 percent to an annualized pace of 5.57 million sales in September, according to the National Association of REALTORS. That pace was the highest level of sales activity in more than two years.
Low mortgage rates, low home prices
The rise in home sales could be attributed to a number of positive factors that bode well for housing markets. Mortgage interest rates have fallen to record low levels, and home prices have become more affordable than they have been in years. When mortgage rates and prices are low, as they have been this year, buying a home becomes much more affordable.
The average interest rate on a conventional, 30-year fixed-rate mortgage dropped to just 5.0 percent in September, according to Freddie Mac. A year earlier, that average rate was 6.0 percent.
The national median price for existing homes was $174,900 in September, a drop of 8.5 percent since a year earlier, according to the REALTORS group. Prices have fallen so much that homes are now selling for less than the construction cost to build a replacement home in much of the country.
“Affordability conditions this year are the highest on record dating back to 1970,” says Charles McMillan, this year’s president of the REALTORS association.
Home buyer tax credit may be extended
The federal first-time home buyer tax credit, which can be worth as much as $8,000, also contributed to the strong rebound in home sales. Indeed, first-time buyers accounted for more than 45 percent of the home sales so far this year, according to early estimates from a report to be released next month by the REALTORS association.
The outlook remains good for the home buyer tax credit to be extended beyond the Nov. 30 deadline and expanded to more buyers in 2010. That would help to continue the momentum that has boosted home sales this year.
“We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year,” says Lawrence Yun, chief economist of the national REALTORS group.