The U.S. Commerce Department has released figures showing that the real estate industry has hit a 13-year high, home sales help to buoy the economy.
In the month of June, the real estate market hit a 13-year high after jumping 13.8%, with the number of new home sales hitting 776,000; a significant increase over May’s sales numbers of 682,000, buoying the wider U.S. economy.
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Michelle Meyer, chief U.S. economist at the Bank of America Securities has told Reuters that “housing has a strong immune system.”
“The shock disproportionately impacted the lower-income population who are less likely to be homeowners,” she continued to explain.
According to that report, “the coronavirus crisis has led companies to allow employees to work from home. The emergence of home offices and schooling has fueled demand for spacious homes in small metro areas, rural markets and large metro suburbs.”
The real estate market contributes 3% of the US economy overall.
Economists suggest that the surge in home purchases is sure buoy the retail industry with sales of furniture and household goods, as well as increased activity for skilled contractors for home renovations.
In spite of the jump for the real estate market, the number of Americans claiming unemployment payments has jumped for the first time in a near four-month period, with 31.8 million benefits checks handed out in the first week of July.
“Job losses have disproportionately affected low-wage workers, which could explain why the housing market is doing much better than other sectors of the economy, which slipped into recession in February,” according to Lucia Mutikani.
Data from Freddie Mac suggests there are more first home buyers than ever before due to mortgage rates averaging 3.01%, nearly a fifty-year low for mortgage rates.
Median house prices have increased 5.6% over June 2019 figures, to an average of $329,000.
James Knightley, chief international economist at ING told Reuters that “this demographic is less likely to have been impacted by unemployment, will be more financially secure and have a better credit history versus younger members of the population who are more likely to work on lower wages in retail and hospitality.”
“Older home buyers are also more likely to be looking for an investment property or a vacation home,” Knightley said.