September was a good month for the housing sector in the U.S. as house sales rose by 4.7 percent, showing this sector still manages to resist the overall turmoil in the worldwide economy.
Stability amid Uncertainty
The 4.7 percent increase comes after a brief slump in August, bringing the seasonally adjusted annual rate to over 5.5 million sales. The demand for housing is still rising in the face of global economic uncertainty, with manufacturing weak, highly unpredictable financial markets and emerging economies such as Turkey and Brazil struggling, not to mention the slowdown in the world’s second largest economy, China. Part of this gain can be attributed to some of the lowest mortgage rates ever and falling unemployment which is now hovering around 5.1 percent.
However, despite the demand, the issue is now becoming supply. In the past year house sales have risen 8.8 percent, but at the same time the number of available properties has fallen by 3.1 percent. At present, the housing market only has a 4.8 month supply of homes which is considerably lower than 6 months which is considered a healthy market.
The drop in supply has had an impact on prices, with the average sale price of a home up by 6.1 percent in September at $221,900. This increase would usually cause a slowdown in sales but many people are using this time to lock in low interest mortgages before the Fed finally pulls the trigger and raises rates.
Despite the fact that almost all regions saw higher sales in September, there was a significant lack of first time buyers in the market. Less than 30 percent of houses sold in September were new purchases, substantially lower than the usual 40 percent. The main cause is that the millennial generation is suffering from huge student loans and low starting salaries which restrict their ability to put together the down payment on a new home. This may not bode so well for future sales once interest rates go up.