Connecticut Select Homes | Fairfield County CT Real Estate

Sales of new homes saw the biggest increase since 2000, rising by 11 percent. Contracts to buy previously owned homes also rose in June for a fifth straight month, as buyers were attracted to lower prices and low mortgage rates .   The housing market is appearing to stabilize as first-time buyers are able to afford houses that were once out of reach thanks to tax incentives and declines in home values.

“We’re starting to see tentative signs of stabilization in housing,” said Anika Khan, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Rates are still low and prices are low. Even though lending standards are still somewhat tight, we are able to see some folks enter the market and get steals.”

The index of  pending home resales gained 3.6 percent. That was preceded by  an 0.8 percent gain the prior month which was larger than previously estimated, said the National Association of Realtors.

The Realtors’ group’s affordability index was at 159.2 in June. It reached a record high of 178.8 in April. This index  takes into account household incomes, mortgage rates and home values. Numbers over 100 indicate a family earning the median income can afford a median-priced home at current borrowing costs.

Mortgage rates are still near record lows, though in recent months have slowly increased as the economy improves. Rates were at an all time low in late April declining to 4.78 percent. The average rate on a 30-year fixed mortgage climbed to 5.25 percent by the week ended July 30, according to Freddie Mac. However, compare that with 6.52 percent in the same week a year earlier.

“Activity has been consistently much stronger for lower priced homes,” NAR chief economist Lawrence Yen said in a statement, noting that first-time buyers must see their contracts close by Nov. 30 to get an $8,000 tax credit.

Another positive sign for the housing market….housing starts unexpectedly rose in June. Commerce figures indicated that residential construction is showing signs of bottoming as construction of single-family dwellings jumped by the most since 2004.  The 3.6 percent increase was the highest level in seven months.

Private residential construction spending increased 0.5 percent after falling 3.1 percent the prior month.

Homebuilder stocks have climbed over the last month indicating that demand is settling at low levels and beginning to pick up. The Standard & Poor’s Supercomposite Homebuilding Index rose 22 percent in July and reached 261.28, the highest level since May 4.

“It’s a modest recovery, however these numbers are exceeding people’s expectations,” said David Sloan, senior economist at 4Cast Inc. in New York. Nonetheless, he said, while there are “genuine signs” of recovery in housing and manufacturing, “the consumer is still the big sort of worry.”

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