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Housing is up and down, but mostly up

Mitchell Hartman Jul 24, 2015
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With summer, the housing market has been warming up. According to the National Association of Realtors, existing home sales were up 3.2 percent in June, on top of strong sales in April and May, to a level not seen since early 2007. June’s new home sales figures were disappointing, with sales down 6.8 percent month-to-month.

Overall, though, it’s been a good first half of 2015 for housing, according to research firm RealtyTrac’s mid-year market report. In fact, the housing market has hit multiple benchmarks not seen since the housing crisis in the late 2000s, including: most homes and condos sold; most price appreciation; and fewest foreclosures and distressed properties sold.

RealtyTrac Vice President Daren Blomquist says investors (often paying cash for distressed properties) are exiting the market, making more room for regular folks trying to buy a home to live in.

“More buyers using low down-payment loans are coming back, and that includes the traditional first-time buyers who’ve never bought a home, and it also includes the boomerang buyers,” Blomquist says. “They’re people who lost their home during the last housing crisis. They’re coming back to the market, and typically they’re going to use a low down-payment loan as well, because they’re not moving up, they don’t have equity to bring to the table.”

Blomquist says these buyers are taking advantage of favorable loan products now available from the Federal Housing Administration, Fannie Mae and Freddie Mac. But he says the rise in buyers without a lot of cash or equity to plow into a home purchase shouldn’t pose a danger to the economy, since mortgage underwriting standards, as well as employment and income verification have been tightened substantially since the housing crash.

Blomquist says home builders may see promise in the improving sale and price trends, and in coming months he predicts they’ll be breaking ground on more single-family homes and condos. Thus far in the recovery, the hottest market for builders has been multi-unit rental properties.

But Blomquist says the market recovery, though broad-based, is still tentative. “I think this market is still very interest-rate sensitive and fragile,” Blomquist says, “and if we see interest rates go up, the kind of boom we were seeing in the first half of the year could quickly disintegrate,” as homes become less affordable with higher interest payments. 

Mortgage rates are low right now, averaging just over 4 percent for a fixed-rate, 30-year home loan. But borrowing costs could start rising as the Federal Reserve tightens interest-rate policy.