Gretchen Apps, a broker for Weichert Realtors in Chadds Ford, Pennsylvania, said demand for new homes is out-pacing land supply. Since January, she and her co-worker have sold all of the new homes she had listed -- one model home and five under- construction or soon-to-be-built in West Chester, Pennsylvania.
“It’s been really moving: we even sold where we really didn’t have anything to show,” Apps said. The houses, all priced at more than $600,000, look traditional even though they have modern amenities inside, she said. “We’re sold out. We are just sad we don’t have more land.”
An improving job outlook may be creating confidence and encouraging buyers. Employers in the U.S. added 195,000 jobs in June for the second straight month.
Improvements in the employment situation and the housing market could boost business at companies such as Whirlpool Corp. The outlook for North America is improving, the appliance makers’ chief executive officer Jeff Fettig said in a July 19 earnings call.
“We’re increasing our industry demand assumption to be up 6% to 8% for the year,” Fettig said. “We continue to see very positive trends in U.S. housing as well as pickup in really all segments of the market.”
Homebuilders have also grown more confident. The National Association of Home Builders/Wells Fargo index of builder sentiment climbed to this month to a seven-year high, the Washington-based group reported last week. The gauge has climbed 13 points in the latest two months, the biggest back-to-back advance since January-February 1992.
While higher borrowing costs spur demand in the short run as on-the-fence buyers take the leap to lock in rates, the current increase in interest rates represents a threat longer term. The average rate for a 30-year fixed mortgage was 4.37% last week, according to McLean, Virginia-based Freddie Mac. The rate reached a record low of 3.31% in November.
While rates are still historically low, that means the monthly payment on a $200,000 loan now would be $998 compared with $877 in November.
Tight inventories also threaten to constrain progress. Purchases of existing homes unexpectedly fell 1.2% to a 5.08 million annualized rate in June, figures from the National Association of Realtors showed this week. The median forecast of 79 economists surveyed by Bloomberg called for a 5.26 million pace. Sales were the second-strongest since November 2009 following May’s downwardly revised 5.14 million rate.
Low supplies helped push the median price of an existing home up 13.5% to $214,200 last month from $188,800 a year earlier, the report showed.
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