U.S. homes sold in September at their fastest clip this year, a sign that the housing market is shaking off a slowdown that began in the middle of 2013.
The National Association of Realtors said Tuesday that sales of existing homes rose 2.4 percent from the previous month to a seasonally adjusted annual rate of 5.17 million. Still, the sales rate has dropped 1.7 percent over the past 12 months.
Investors have retreated from the market over the past year. Their departures are being offset by existing homeowners who are upgrading to more expensive properties or downsizing after having raised their children. First-time buyers comprised just 29 percent of sales, well below their historic average of roughly 40 percent.
The figures suggest that the sales decline that began last year has ended, although home-buying is unlikely to surge back to its historic averages.
“The worst is over, but don’t expect a rapid rebound in activity or prices,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Rising prices through much of 2013, weak income growth and tighter credit standards have pushed some would-be buyers out of the market. Median home prices rose 5.6 percent over the past 12 months, to $209,700.
Many homeowners are still coping with the fallout from the meltdown in home prices that began roughly seven years ago. And prices continue to recover from the depths of that housing bust, although that growth has slowed after climbing at double-digit levels in many cities last year.
Median household incomes have yet to completely rebound, and remain below their 2007 levels after adjusting for inflation. Limited income gains have cut into the cash flow and down-payment savings needed to purchase a home. The federal regulator overseeing mortgage giants Fannie Mae and Freddie Mac is considering an option for lower down payments, so that more people can qualify for a mortgage.
Federal regulators agreed Tuesday to loosen some credit regulations. The board of the Federal Deposit Insurance Corp. voted 4-1 to remove a requirement that borrowers must provide a 20 percent down payment if their bank doesn’t hold on its books at least 5 percent of the mortgage securities tied to its home loans.
More buyers may also return to the market after the average 30-year fixed-rate mortgages dropped below 4 percent last week, down more than half a percentage point from the start of 2014. Still, average rates were as low as 3.34 percent in January 2013, and there are few signs that home sales will surge anytime soon.
The market has also tilted more toward buyers. The online real-estate brokerage Redfin reported that only 44 percent of its offers have faced bidding wars in October, compared to a high of 75 percent in March 2013. Additional homes may also come onto the market toward the end of the year, as investors plan to sell for tax reasons, possibly making conditions more preferable for buyers, said Redfin chief economist Nela Richardson.
September sales improved in the South and West compared to the prior month, ticked up slightly in the Northeast and fell in the Midwest, according to the Realtors’ report. The share of purchases by investors fell to 14 percent from 19 percent a year ago.
The Realtors have projected that 4.94 million existing homes will be sold this year, down 3 percent from 5.09 million in 2013. Analysts generally associate sales of roughly 5.5 million existing homes with a healthy market.
A separate Realtors index tracking the number of signed contracts to purchase a home slipped in August, falling 1 percent compared with the prior month, to 104.7. Pending sales are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale.
Construction data suggests a shift away from home ownership toward renting.
The Commerce Department reported last week that housing starts rose 6.3 percent to a seasonally adjusted annual rate of 1.017 million homes, with almost all of the gains coming from the building of apartments.
Apartment construction has surged 30.3 percent over the past 12 months, almost three times the rate of growth for single-family houses.