Sales of previously-owned homes in America popped much more than Wall Street expected, data from the National Association of Realtors showed on Friday.
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Existing home sales rose 1.7% last month to a seasonally-adjusted rate of 5.45 million unites, compared to expectations for a smaller rise of 1.3% to 5.40 million units during the period. Further, the pace of growth in March was revised up to 5.36 million homes from 5.33 million.
The NAR said what’s helped fuel the growth is low mortgage rates, which have helped keep housing options more affordable. The data is consistent with other recent figures on the U.S. economy which show a more robust pace of growth in the second quarter compared to a slowdown in the first three months of the year.
IHS U.S. Economist Kristin Reynolds noted that she expects to see progress in the housing market alongside moderate price appreciation which would encourage an expansion in available inventory across the country.
“With continued improvement in the employment situation leading to higher incomes, and borrowing costs remaining low, the fundamentals remain supportive,” she said.
Reynolds also pointed out, though that while both the average and median price of a single-family home accelerated for the third-straight month in April, they did not rise as fast as they did during the same timeframe in 2015 mortgage commitment rates are at the lowest level since mid-2013.
Tom Booker, managing director at Collingwood Group and a former executive at Fannie Mae, said while the home sales figures were good, to him, they were a bit of a “so what.”
“It’s the beginning of the spring. Housing numbers should be up, housing starts have been great. But the real challenge for is that there are too many borrowers being left out of the equation,” he explained of FOX Business Network’s Cavuto Coast to Coast.
He explained that many of those looking to obtain a mortgage on a home have FICO scores of 700 or above – in other words, credit scores that deemed“ really good” or better. FICO mortgage scores are used to indicate a homebuyer’s credit risk.
While some argue lending to those with high FICO scores cuts down on risky borrowing that led to the housing meltdown and Great Recession, Booker said there are other factors to consider.
“The people we’re talking about now have lived through the crisis, have been out there for eight or nine years renting. They look at a future where rent increases are going up 5% and 7% a year and really don’t have a way to participate,” he said. “I would make the argument that there’s a way to get good loans under a 700 FICO score.”
The other part of the equation, Booker explained, are younger adults waiting to jump into the housing market after witnessing their parents run into serious financial trouble during the meltdown. Still, he said as those younger Americans grow older, have children, and desire a central place for their lives, they’ll begin to dip their toes into the housing market.
“As they begin to have a need for a base from which to work, there’s a real desire to try to find a way to own a home,” he said.