According to American media reports, job growth is continuing to drive a strong recovery in the US housing market, with mortgage starts last week jumping 17% to their highest level since April.
Despite the downward spiral caused by Black Monday on 24th August, mortgage applications for the same week saw an uplift of 11.3% compared with the previous week, according to a Mortgage Bankers Association report released on Wednesday.
"You had some borrowers looking to refinance who really took advantage of the short availability of very low rates," Mike Fratantoni, the association's chief economist, said. "You had a number of people following the market very closely."
Volatility triggered by China's economic slowdown
The widespread volatility triggered by China's economic slowdown led to moments of very low interest rates on 10-year US Treasury notes – a key benchmark for the mortgage-lending market. The Federal Reserve has been preparing to raise interest rates at 'some point' before the end of the year and the resulting uncertainty prompted home-buyers to seek finance ahead of the expected rate-hike during last week's market mayhem.
However, economists maintain that growth in the US housing market is underpinned by consistently rising demand driven by increased affluence and improved affordability as the American economy strengthens. Fratantoni said: "We do expect improvement in the housing market to continue. Job growth and declining unemployment rate and wage growth – those are really the factors that we focus on."
The trend in existing home sales, accounting for 90% of the housing purchase market is also increasing. Danielle Hale, director of housing statistics at the National Association of Realtors (NRA) said, "It's one of the key numbers we pay attention to and we've seen eight-year highs in those numbers recently."
According to the NRA properties are selling at a faster rate than last year, with homes selling in July 2015 typically spending 42 days on the market before closing, compared to 48 days in July 2014.
Dan Porter, owner of Chicago realtors Porter House Properties told International Business Times: "All those people who have been renting or living with mom and dad are starting to hit the market."
The US housing recovery has been slow in the wake of the financial crisis as potential buyers retreated to the sidelines. "That normal flow was interrupted for a few years, so it will take us a couple of years to get to what I would say is normal, although everything is going in the right direction," Porter added
Home sales reached 5.59 million
Last July, the annual rate for existing home sales reached 5.59 million in the US, the highest pace since the 5.79 million recorded in February 2007. An improving job market bodes particularly well for the housing market as more people find themselves able to afford to buy their own homes.
Banks more willing to lend money
"As the US economy improves, banks are also more willing to lend money to prospective buyers", Matthew Pointon, a property economist at research firm Capital Economics, said. He cited data from US mortgage processors Ellie Mae showing the rise in loan applications that won approval as 71% of mortgage applications in July 2015, up from 62% for the same month last year.
“Banks are feeling more confident,” Pointon said. “They're looking ahead and they're seeing a strong economy. They're seeing people's incomes going up.” Current growth in the US housing market is underpinned by strong fundamentals, indicating a sustainable recovery is now in full-swing.