Vero Beach home sales rose in July to their highest level in over three years, with year-over-year prices again showing double-digit gains.
Rising interest rates as well as rising prices are expected to tamp down both prices and the number of Vero Beach home sales in coming months, as homes get less affordable. The shortage of homes for sale, particularly for first-time buyers, continues in many areas.
"Mortgage interest rates are at the highest level in two years, pushing some buyers off the sidelines," Lawrence Yun, the NAR's chief economist, said in a news release. "The initial rise in interest rates provided strong incentive for closing deals. However, further rate increases will diminish the pool of eligible buyers."
For the buyer of a median-price house who puts 20% down, mortgage rate increases since May have raised the monthly payment by about $100.
The risk is that last month's gains in demand may prove temporary, and driven by buyers who rushed to lock in a home before interest rates went up.
The national median home price, including single-family and condos, was $213,500. That's 13.7% above the national median price a year ago and only 7.3% below the peak of $230,400 in July 2006.
More Inventory Should Help Vero Beach Home Sales
Vero Beach home sales should benefit from the fact that the number of homes for sale continue to increase as more and more potential sellers hit the market. The average supply at the current rate of sales stands at 5.1 months.
The key for the economy is whether the stronger market, coupled with a continued shortage of homes for sale, will prompt home builders to step up construction and add jobs. Moody's Analytics says a jump from less than 1 million new homes a year to 1.7 million, which it considers the underlying level of demand for newly built housing, could add more than 3 million jobs by 2015.
Distressed homes continued to make up a smaller percentage of Vero Beach home sales, one of the factors that is driving up median prices, since foreclosures and short sales sell at a discount. In July, distressed homes were 15% of sales, down from 24% a year ago.
All-cash Vero Beach home sales continued to be a strong factor, making up 31% of the deals, up from 27% a year ago.
