WASHINGTON (Reuters) – U.S. home sales surged to their highest level in nearly 14 years in August as the housing market continued to outperform the overall economy, but record high home prices could squeeze first-time buyers out of the market.
The report from the National Association of Realtors confirmed home sales had recovered after slumping when the economy almost ground to a halt as businesses were shuttered in mid-March in an effort to slow the spread of COVID-19.
Demand for housing is being fueled by record-low mortgage rates and a pandemic-fueled migration to suburbs and low-density areas in search of more spacious accommodation as many people work from home. Federal Reserve Chair Jerome Powell told a congressional panel on Tuesday that the economy has shown “marked improvement” since plunging into recession in February, though the path ahead remains uncertain.
“The housing market has continued its remarkable recovery amidst an otherwise fraught economy that has been battered by the pandemic,” said John Pataky, executive vice president at TIAA Bank in Jacksonville, Florida.
“However, we should continue to be paranoid about the sustainability of sales. With lack of housing supply, there is an upward pressure on home prices which threatens to detract the benefits accrued from low mortgage rates.”
Existing home sales increased 2.4% to a seasonally adjusted annual rate of 6 million units last month, the highest level since December 2006. August’s increase in homes sales, which marked three straight months of gains, was in line with economists’ expectations.
The median existing house price jumped 11.4% from a year ago to a record $310,600 in August. Sales last month were concentrated in the $250,000 to $1 million and over price range, with transactions below the $250,000 price band down sharply.
Existing home sales, which account for the bulk of U.S. home