Even though property inventories continued to thin across the country last month, the sales rate of existing homes increased on both a month-over-month and annual basis.
Overall existing-home sales, including single-family properties, condominiums, co-ops and townhouses, experienced a 2.3 percent increase in July from the previous month, according to a report from the National Association of Realtors. This pushed the seasonally-adjusted annual sales rate to an estimated 4.47 million units.
The sales rate grew 10.4 percent from July 2011 when the pace was recorded at 4.05 million units, the report said. Housing affordability hovering near its record-high could be a major factor driving these trends.
"Mortgage interest rates have been at record lows this year while rents have been rising at faster rates," said NAR chief economist Lawrence Yun. "Combined, these factors are helping to unleash a pent-up demand. However, the market is constrained by unnecessarily tight lending standards and shrinking inventory supplies, so housing could easily be much stronger without these abnormal frictions."
Sales of distressed properties, including foreclosed houses and short sales, accounted for roughly 24 percent of all transactions, which was a slight decline from the previous month when these sales held a 25 percent share.
Home prices surge
Although distressed properties accounted for a significant share of sales, home prices experienced a significant increase last month. Specifically, the national median existing-home prices rose 9.4 percent from July 2011 to $187,300. This was the strongest annual gain recorded since January 2006 when prices spiked 10.2 percent on an annual basis.
Mortgage activity declines
With housing affordability hovering near an all-time high and more consumers showing interest in properties, overall mortgage application activity declined during the week ending August 17, according to the Mortgage Bankers Association.
During this period, the seasonally-adjusted Purchase Index dropped nearly 1 percent from a week earlier, the report said. In addition, the refinancing share of activity plummeted 9 percent to account for just 80 percent of activity.
As the personal financial situations of more American continue to gain traction, there could be an increase in mortgage activity in the coming weeks and months. However, a lack of available existing properties could be a serious long-term obstacle.