Not surprisingly, sales of existing homes took a dive in July after the expiration of the home buyer tax credit. But home prices continued to rise, if only slightly. The reason is that interest rates for a 30-year fixed mortgage have never been lower, meaning that buyers can afford more expensive homes.
In the Western region, sales fell 25% in July, but the median price rose 3.3%, compared with July of 2009 to $224,800. Statistics for Boulder showed a more sluggish market. Volume of single family home sales in July fell almost 29% compared to July of 2009 and the median home price rose less than 1% to $524,500.
Lawrence Yun, NAR chief economist, said a soft sales pace likely will continue for a few additional months. “Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired. Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September,” he said. “However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs.
Interest rates for a 30-year mortgage have never been lower. Last week, Freddie Mac reported the 30-year fixed was down to 4.42 percent. To understand just how significantly low these rates are, look at the orange line on this chart (in the 1980s, rates climbed up into the teens).
Reproduced with the permission of Mortgage-X.com
