|
|
|
|
Extra
Home prices, sales rise at blistering pace
4.5% increase in existing home sales sets a record; median prices up 15.1% over last year, a pace not seen in 25 years.
By MSN Money news services
Sales of existing homes rose at a blistering pace in April while prices climbed at the fastest pace since the late 1970s, heightening concerns among economists that the U.S. housing market is overheating.
Sales climbed 4.5% to a record 7.18 million units on an annualized basis, encouraged by the persistence of low mortgage rates and robust consumer sentiment. The pace was well above the 0.2% advance that had been forecast.
The price of a median single family home rose by 15% over the year -- a rate of growth last seen in 1979.
More talk of bubbles
The figure comes amid mounting anxiety that a bubble is developing in the housing market.
At the end of last week Alan Greenspan, the chairman of the Federal Reserve, gave his clearest indication of concern over housing, admitting there appeared to be "a lot of local bubbles."
Related auction resources
David Lereah, chief economist at the Realtors, said he agreed with Greenspan's concerns.
Certainly there are some select areas where there could be some froth, Lereah said in releasing the new report.
There has also been growing evidence that speculative pressures have been building. The National Association of Realtors recently acknowledged that around a quarter of recent home purchases may have been for investment purposes.
Economists are worried that an increasing number of families have been forced to cut financial corners in order to move into new homes -- abandoning the traditional 30-year fixed rate mortgage in favor of cheaper adjustable rate deals.
The Mortgage Bankers Association recently reported that over 60% of the dollar value of new mortgage loans were adjustable rate or interest-only deals.
"The fact that so many people are opting for adjustable rate mortgages when 30-year rates are still so low is a very worrying sign," said Ian Morris, U.S. economist at HSBC. "As rates move higher this will squeeze a lot of people as their adjustable rate mortgages are reset."
Median price zooms upward
The strength in sales last month was accompanied by further upward pressure on home prices. The median price for an existing home sold last month rose to a record $206,000, up 15.1% over the median price a year ago.
That represented the biggest 12-month gain in home sales prices since November 1980 and was certain to add to concerns that the housing industry could be experiencing a speculative bubble similar to the stock market bubble which popped in the spring of 2000.
By region, sales were up 7% in the South, 5.8% in the Midwest, 4.3% in the Northeast and were unchanged in the West last month.
U.S. house prices have not fallen nationwide over a calendar year since the Great Depression of the 1930s. But some economists are worried that there is a greater chance this will happen this time.
|
|
|
|
