The U.S. housing market has sizzled this summer, lifting expectations that home sales will finally help drive an economic expansion now in its seventh year.
Or will it?
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Signs are emerging that housing's momentum may be destined to falter in coming months. Analysts note that some of the key foundations needed to sustain a brisk pace of home-buying in the long run appear to be missing.
The U.S. economy had only just begun to derive strength from housing for the first time since the Great Recession began in 2007. If home sales flag, that strength would fizzle.
The main problem is also the simplest: There just aren't enough homes available. Robust demand has failed to draw many sellers into the market. And few in the industry foresee a flurry of home listings arriving soon.
Other pressures will also likely slow sales. Steadily rising home prices can put ownership out of reach for some. What's more, builders are increasingly focused on apartment construction rather than single-family homes.
And then there are mortgage rates, which have crept up from recent lows and made it incrementally harder for some would-be buyers already struggling to afford a purchase. Some buyers are rushing to finalize deals for fear that rates will keep rising — a trend that could depress demand later this year.
"What we fear is next is if interest rates rise and prices rise," said Deborah Heffernan, a Boston-area broker. "That combination will definitely eliminate people from the market."
Early this spring, buyers leapt back into the market. Mortgage rates were just slightly above their 2012 lows, and nearly two years of solid job growth had generated millions of new paychecks.
Sales of existing homes have surged 9.6 percent in the past 12 months, according to the National Association of Realtors. In June, they hit an annual rate of 5.49 million, a pace last achieved before the recession began. And sales of new homes have jumped 21 percent through the first half of 2015, the government reported Friday.
But an unusual trend has taken hold: Stronger home sales have yet to motivate many people to put their homes on the market. Listings for existing homes have barely edged up in the past year. And the pace of home building remains subpar compared with previous economic expansions.
With buyer demand outstripping supply, the national median sales price for homes last month reached $236,400, the highest ever recorded, the Realtors said.
For many would-be buyers, those higher prices are manageable if mortgage rates remain ultra-low. In June, the average 30-year fixed mortgage was 3.8 percent. The average has since topped 4 percent as the Federal Reserve has moved toward raising a key interest rate from its near-zero level. When the Fed last prepared to curtail its stimulus efforts in 2013, rates spiked and home sales sank.
Though only modestly up, the higher mortgage rates are having a dampening effect, according an index of buyer demand released Thursday by the national real estate brokerage Redfin. It expects a slowdown in the growth of sales and prices as buyers pursue less expensive homes.
"Interest rates are having an effect," said Nela Richardson, chief economist at Redfin. "It's making buyers a bit more conservative."
In some key markets, prices have begun to stagnate as buyers seem to be retreating. A majority of homes in Chicago, Phoenix, Los Angeles, New York and Washington, D.C., either lost value or basically flat-lined during May, according to a study by Weiss Residential Research.
Weiss' analysis points to a contributing factor for the shortage of available homes: Many homeowners can't find affordable homes themselves and so can't list their own properties for sale.
"The reason why demand is high relative to supply is that homeowners are having a hard time moving up," said Allan Weiss, founder of Weiss Residential Research. "There is gridlock."
In addition, many Americans remain squeezed by sluggish pay raises and have chosen to continue to rent. And some who do want to buy are unmoved by the limited selection and have decided to wait, said Tony Smith, a real estate broker in Charlotte, North Carolina.
"Buyers are leaving the market because they don't have anything to buy," Smith said. "Some of them get frustrated and sign another lease."
Indeed, home ownership is declining, and renting has surged. Fewer than 64 percent of Americans own homes, the lowest level since 1989, according to the Census Bureau. The share of people under age 35 who own has dropped to around 35 percent from a high of 44 percent in 2004.
Marina Rodriguez, a 26 year-old dental hygienist, recently signed a lease on a one-bedroom apartment in suburban Chicago.
"The idea of buying is a little scary — it's a huge financial obligation," she said. "I would rather rent and travel and be year-to-year then be locked down."
Builders are tapping into the rental market. Nearly all the 7.4 percent increase in June building permits came from apartment complexes, the government said last week. The three-story townhomes that Chicago-based REVA Development Partners once sold to first-timers and empty-nesters are now being rented.
"There has been a fundamental shift in people's attitudes toward home ownership," said the Matt Nix, the firm's principal.
There's also evidence that construction is topping out, a potential blow to overall economic growth. The American Institute of Architects said its index that tracks billings for houses and apartments has reached a four-year low. There's often a nine- to 12-month lag between drawing up blueprints and a groundbreaking, a sign that builders view the current demand as short-lived.
"What we're seeing now is going to hit construction in 2016," said Kermit Baker, the institute's chief economist. "It does look like that market is getting close to peaking."