House under construction

A house under construction in Michigan. By Dwight Burdette (Own work) [CC BY 3.0 ], via Wikimedia Commons

Last month was the hottest April on record, and the housing market was on fire as well with existing home sales racing even higher. Since this time last year, sales are up by six percent. Existing home sales in April reached a seasonally adjusted annual rate of 5.45 million units. That is a solid increase from March 2016’s annual rate of 5.36 million units.

So far, 2016 has been a good one for sellers, and Midwestern cities like Chicago have helped boost the market. In April, sales jumped by more than 12 percent. Chicago had a huge month, and home sales in the Windy City hit highs that haven’t been seen in eight years. More than 2,600 homes were sold in Chicago, and more than 10,200 over the nine-county metropolitan area. The sales were 7.9 and 9.3 percent higher, respectively, than last year. The solid sales have pushed median prices in the area to $230,000, more than 10 percent higher than last year’s $208,000.

Inventory across the country has been tight thanks to the strong sales in recent months. However, April saw a nice boost in the number of unsold homes, jumping 9.2 percent from last month to 2.14 million. Unsold units are still down from last year. Currently, the market would need just 4.7 months to sell (or absorb) all of the available homes (up from March’s 4.4 months). Economists consider a six-month supply absorption optimal.

Another indicator that suggests the real estate market is doing well is higher builder confidence. The National Association of Home Builders/Wells Fargo Housing Market Index was 58 earlier this month. It is the fourth consecutive month where the index is 58. Any value over 50 is considered positive; and the consistency of this indicator suggests that builders of single-family homes are confident in the market’s direction.

With so much good news, it appears that the weak housing market that arose after the economic downturn may finally be in the rearview mirror. The combined rate of both new and existing home sales hit 6 million units. It is a threshold that hasn’t been reached in the U.S. real estate market since 2007. Builders are confident, sellers are seeing rising prices, and buyers are finding a larger inventory of homes. All signs are pointing to a revived housing market. Some analysts are predicting that total annual sales could be the highest in a decade, topping 5.4 million homes.

Do you think the market will continue to grow? Let us know in the comments.