US Home Sales Rally As Prices Continue To Drop
A continuing decline in US home prices is fueling a slight pickup in sales, as bargain hunters and investors look to buy before mortgage rates rise, even though many experts say prices could drop further still. A new wave of foreclosures hitting the market drove the median price for US homes down to $158,800 in January, according to data from the National Association of Realtors. It's the lowest median US home price since 2002.
Sales, meanwhile, have climbed 22 percent since October, marking the largest three-month gain in the data since the end of the federal homebuyer tax credits. The rally has coincided with a steady rise in mortgage rates from record lows set in November and gradual improvement in the overall economy.
Fannie Mae, meanwhile, has projected that home values will drop further this year, even as demand and sales pick up. Discounts for distressed properties are driving down prices of other properties, increasing affordability and making the market accessible to more people. A prolonged increase in sales could indicate a bottom for prices as values reach a level buyers just can't resist.
The average rate for a 30-year, fixed-rate mortgage last week was 4.87 percent, well above the historic low of 4.17 percent set just three-and-a-half months ago, according to data from Freddie Mac. A forecast from the Mortgage Bankers Association, meanwhile, indicated that the average rate for the most popular type of US mortgage could rise as high as 6 percent by the end of 2011.
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