By Vicki Needham - 08/21/14 06:02 PM EDT
Sales of previously owned homes hit their highest annual pace of the year in July as the housing sector continues improving.
The National Association of Realtors said Thursday that total existing home sales, which are completed transactions that include single-family homes and condominiums, rose 2.4 percent to a seasonally adjusted annual rate of 5.15 million in July, from 5.03 million in June.
But another big sign of the market's recovery is the drop in short sales and foreclosures.
Distressed homes accounted for 9 percent of July sales, down from 15 percent a year ago, the first time in the single digits since the NAR started tracking the category in October 2008.
In 2009, distressed homes represented an average of 36 percent of sales.
“The number of houses for sale is higher than a year ago and tamer price increases are giving prospective buyers less hesitation about entering the market,” said Lawrence Yun, NAR chief economist.
He said that sales momentum is slowly building behind stronger job growth and improving inventory conditions.
“More people are buying homes compared to earlier in the year and this trend should continue with interest rates remaining low and apartment rents on the rise.”
Yun warned that affordability could become an issue if wages don't rise.
“Although interest rates have fallen in recent months, median family incomes are still lagging behind price gains, and mortgage rates will inevitably rise with the upcoming changes in monetary policy,” he said.
The average rate for a 30-year fixed-rate mortgage fell for the third consecutive month to 4.13 percent in July from 4.16 percent in June, and remains the lowest rate since June 2013 (4.07 percent), according to Freddie Mac.
The median existing home price for all housing types in July was $222,900, which is 4.9 percent above July 2013 and is the 29th consecutive month of year-over-year price gains.
Total housing inventory at the end of July rose 3.5 percent to 2.37 million available for sale, a 5.5-month supply at the current sales pace.
Unsold inventory is 5.8 percent higher than a year ago, when there were 2.24 million existing homes available for sale.
Yun said the deepest housing wounds from the recession are beginning to fully heal.
“Fast-forward to today and rising home values are helping owners recover equity and strong job creation is assisting those who may have fallen behind on their mortgage due to unemployment or underemployment," he said.
All-cash sales in July were 29 percent of transactions, down from 32 percent in June and representing the lowest overall share since January 2013 (28 percent).
Individual investors, who account for many cash sales, purchased 16 percent of homes in July, unchanged from last month and July 2013.
The percent share of first-time buyers in July rose slightly for the second straight month to 29 percent (28 percent in June), but remain historically low.
Regionally, sales in the Northeast were flat in July but rose 1.7 percent in the Midwest, 3.4 percent in the South and 2.6 percent in the West.