Updating New Home Sales, Existing Home Sales, And The Rental Market
The Department of Commerce reported July sales of new homes dropped by 2.40 percent over June to a four month low. Analysts noted that although July’s reading of 412,000 new homes sold fell short of expectations and June’s reading, the new homes sector is volatile and subject to change.
June’s reading of 406,000 new homes sold was revised to 422,000 new homes sold; expectations were based on the original reading. Three of four regions posted a slower rate of growth for home prices with only the South posting a gain.
The average price of a new home in the U.S. rose to $269,800, which is 2.90 percent higher than June’s average home price. Inventories of new homes increased to a six-month level based on current sales pace.
This was the highest inventory of new homes available since 2011. Strict mortgage credit requirements and an elevated national unemployment rate contributed to the lower rate of home value appreciation and higher inventories of new homes.
The good news: New home sales increased by 12.90 percent year-over-year in July.
There are presently quite a few areas where you can buy a new home in Orange County, primarily though, in South County. There are pocket communities in Tustin, Irvine, Lake Forest, as well as the entirely new community just South of Ladera Ranch, Rancho Mission Viejo.
Existing Home Sales Rise: Steady Mortgage Rates, Rising Rents Cited
The National Association of REALTORS® reported that July sales of previously-owned homes rose from June’s revised figure of 5.03 million sales to 5.15 million sales and achieved the highest reading for 2014.
The existing home sales readings are calculated on a seasonally adjusted annual basis. Existing home sales were 4.30 percent lower than for July 2013, which had the highest reading for existing home sales in 2013.
Lawrence Yun, chief economist for the NAR, said that a growing inventory of available pre-owned homes for sale and strengthening labor markets contributed to sales growth. Mr. Yun said that July’s pace of sales was expected to continue based on mortgage rates holding steady and rising rents for apartments.
The inevitable rise of mortgage rates and increasing home prices were cited as factors that could cool existing home sales in coming months. With the Fed scheduled to complete its asset purchase program in October and changes to the Fed’s target federal funds rate expected within months, mortgage rates are expected to rise. Affordability looms as an obstacle to sales; home prices continue to rise as wages grow at a slower pace than home prices.
The national median price for existing homes was $222,900, which was a year-over-year increase of 4.90 percent. This was the 29th consecutive month for year-over-year price gains for existing homes. The inventory of existing homes for sale increased by 3.50 percent to 2.37 million available homes and represents a 5.50 month supply. Unsold inventory of existing homes is 5.80 percent higher year-over-year. As compared to July 2013’s reading of 2.24 million available pre-owned homes.
Homes sold through foreclosure or short sales have steeply declined from 36 percent of existing home sales in 2009 to approximately 9 percent in July and were down from 15 percent of existing home sales in June. ( In Orange County, the percentage of distressed property sales is less than 5%.)
The South Orange County Rental Market is Booming
While both the local new home, and the existing home market’s have slowed considerably as we enter the fall, the rental market has remained quite strong. I have been seeing increases of 7-10% in the rental prices over the past year. Many of my clients who have moved up into a bigger house – if they had the wherewithal – have kept their former home and turned it into a rental. as part of my advice. In almost every case, I’ve been able to get tenants moving in, no longer than a week after my clients moved out.
Vacancy factors have been practically non-existent, as I have also had great success replacing former tenants who have moved on – almost always within a week of the past tenants moving out. The management of rental properties has become an increasingly higher percentage of my business, and my clients have been happily increasing their net worth, with the holding onto, or the acquisition of additional rentals. This is an excellent time to either be, or to become, a landlord.