Home sales rose strongly during the first few months of 2014, with the number of sales hitting a six-month high in May. Economic experts say that the increasing pace of home sales indicates that the housing market is beginning to bounce back after a slump in 2013.
Home sales are an important indicator of economic conditions. Higher home sales figures indicate that people are finding it easier to borrow money and that there is greater confidence in the housing market.
One important factor influencing the rate of home sales is the rate of interest charged by lenders. Higher rates make mortgages less affordable, blocking many first-time buyers and buyers looking to move onto a bigger, more expensive home from accessing the credit they need to buy a suitable property.
Interest rates jumped up sharply in the spring of 2013, causing a dip in the demand for property. Home sales slumped, leaving many homeowners looking to move unable to find a buyer for their existing home. Since that time, interest rates have moderated, giving buyers more options for accessing credit. Rates in May were at their lowest for six months, which may explain the boom in home sales during this month.
However, the trend of rising sales may not be set to continue. According to officials from the Federal Reserve, a rate increase is due to happen next year. This is likely to push mortgage rates back up, deterring buyers from entering the market. Stringent checks, which have been introduced to assess the affordability of loans, are also making it difficult for many people to access credit.
Experts say that the strength of the labor market has a strong effect on home sales. Unemployment figures have been dropping in recent months, with more businesses looking to hire new employees. Even in the face of rising mortgage rates, the increasing number of people getting into stable employment could help to keep up the pace of the rise in home sales.
The recovery in the housing market is good news for real estate agents and other professionals working in this industry. The figures are also welcomed by builders of new homes. In order for the upward trend to continue, lenders must ensure that first-time buyers can gain access to the credit they need to take their first step onto the housing ladder. According to U.S. economist Stephanie Karol, first-time buyers are crucial for maintaining the pace of home sales.
Although it is still uncertain whether home sales will continue to rise, the upward trend during the first half of 2014 gives cause for optimism. Continuation of this trend depends upon several factors, including mortgage rates, availability of homes and the ability of first-time buyers to access credit.
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