Americans bought homes in June at the fastest rate in over eight years, pushing prices to record highs as buyer demand has eclipsed the availability of houses on the market.
The National Association of Realtors said Wednesday that sales of existing homes climbed 3.2 percent last month to a seasonally adjusted annual rate of 5.49 million, the highest rate since February 2007. Sales have jumped 9.6 percent over the past 12 months, while the number of listings has risen just 0.4 percent.
The median home price has climbed 6.5 percent over the past 12 months to $236,400, the highest level - unadjusted for inflation - reported by the Realtors.
The Greater Chattanooga Association of Realtors said Wednesday median home prices last month rose locally to $155,000, up 5.8 percent from a year ago. In the first half of 2015, local Realtors sold 7,494 homes or 6.7 percent more than a year ago.
The higher sales cut the supply of inventory on the market by 40.6 percent and the number of days the typical house is on the market from 105 days a year ago to only 73 days last month, a 30.5 percent drop.
"When the inventory shrinks this much and there are not as many homes to choose from, they usually sell quicker and sell for more money," said Travis Close, president of the Greater Chattanooga Association of Realtors. "In most areas of Chattanooga, we're seeing some houses sell within the first week on the market and we haven't seen that in a long time."
Home-buying has recently surged as more buyers have flooded into the real estate market. Robust hiring over the past 21 months and an economic recovery now in its sixth year have enabled more Americans to set aside money for a down payment. But the rising demand has failed to draw more sellers into the market, limiting the availability of homes and sparking higher prices that could cap sales growth in the coming months.
"The recent pace can't be sustained, but it points clearly to upside potential," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Nationally, a mere five months' supply of homes was on the market in June, compared with 5.5 months a year ago and an average of six months in a healthy market.
Some of the recent sales burst appears to come from the prospect of low mortgage rates beginning to rise as Fed officials consider raising a key interest rate from its near-zero level later this year. Past efforts by the Fed officials to reduce their stimulus efforts have led to higher mortgage rates, creating expectations that homebuyers will face increased borrowing costs later this year.
That possibility is prompting some buyers to finalize sales before higher rates make borrowing costs prohibitively expensive, noted Daren Blomquist, a vice president at RealtyTrac, a housing analytics firm.
The premiums that the Federal Housing Administration charges borrowers to insure mortgages are also lower this year, further fueling buying activity, Blomquist said.
It's also possible that more homebuyers are aggressively checking the market for listings, enabling them to act fast with offers despite the lack of new inventory.
"Buyers can more quickly be alerted of new listings and also more conveniently access real estate data to help them pre-search a potential purchase before they even step foot in the property," said Blomquist, adding that this could help to explain why sales growth have dramatically outpaced new listings so far this year.
Properties typically sold last month in 34 days, the shortest time since the Realtors began tracking the figure in May 2011. There were fewer all-cash, individual investor and distressed home sales in the market, as more traditional buyers have returned.
Home prices have increased at more than three times the pace of wages. The average hourly wage has risen just 2 percent over the past 12 months to $24.95 an hour, according to the Labor Department.
Real estate had until recently lagged behind much of the six-year rebound from the recession, hobbled by the wave of foreclosures that came after the housing bubble began to burst roughly eight years ago.
But the job market found new traction in early 2014. Employers added 3.1 million jobs last year and are on pace to add 2.5 million jobs this year. As millions more Americans have found work, their new paychecks are increasingly going to housing, both in terms of renting and owning.
Low mortgage rates have also helped, although rates are now starting to climb to levels that could slow buying activity.
The average 30-year fixed rate was 4.09 percent last week, according to the mortgage giant Freddie Mac. The average has risen from a 52-week low of 3.59 percent.