Borrowing costs and home prices remain favorable. The average rate on a 30-year fixed mortgage held at 3.55 percent in the week ended Sept. 13, near the 3.49 percent on July 26 that was the lowest in data dating to 1971, according to McLean, Virginia-based Freddie Mac.
Homebuilders such as Red Bank, New Jersey-based Hovnanian Enterprises Inc. and Toll Brothers are seeing increased demand.
“Due to the industry’s rebound and our increase in sales pace, our communities are selling out more quickly and literally caught us without being able to replenish as fast as we’d like,” Ara K. Hovnanian, the company’s chairman, president and chief executive officer, said on a Sept. 6 earnings call.
Toll Brothers, the largest U.S. luxury-home builder, reported a better-than-estimated profit and an increase in revenue for its third quarter ended July 31. The average price of the homes that the Horsham, Pennsylvania-based company delivered in the quarter climbed to $576,000 from $557,000 in the previous three months.
“The housing recovery is being driven by pent-up demand, very low interest rates and attractively priced homes,” Chief Executive Officer Douglas Yearley Jr. said on an Aug. 22 conference call with investors. “With an industry wide shortage of inventory in many markets, we are enjoying some pricing power.”
In July, sales of new homes rebounded to a two-year high, Commerce Department figures showed Aug. 23.
At the same time, distressed houses threaten to add to inventory and restrain prices, impeding some homeowners from relocating.
The industry may be helped by the Federal Reserve’s plan for open-ended purchases of mortgage-backed securities. Fed Chairman Ben S. Bernanke called housing “one of the missing pistons in the engine” last week as he announced the third round of quantitative easing, meant to boost growth and reduce unemployment.
“Our mortgage-backed securities purchases ought to drive down mortgage rates and put downward pressure on mortgage rates and create more demand for homes and more refinancing,” he said.
O’Sullivan said that while “it’s not going to make any sudden difference, on the margin it’ll help a little bit.”