April 18, 2024

Rising Rates Did Little to Curb July Home Sales

The National Association of Realtors said on Wednesday that existing-home sales rose 6.5 percent to a seasonally adjusted annual rate of 5.39 million units.

The increase in home sales exceeded Wall Street’s expectations and could make the Federal Reserve more comfortable with its plans to start winding down its economic stimulus program. Mortgage rates have been climbing in anticipation that the Fed will soon taper its stimulus.

While some of July’s surge in home resales may reflect buyers rushing to lock in mortgage rates before they rise further, the data inspired some confidence that the housing recovery was strong enough to withstand higher borrowing costs.

“The basic take-away is that the rise in mortgage rates has been manageable,” said Ryan Sweet, an economist with Moody’s Analytics.

After being devastated by a financial crisis and the 2007-9 recession, the home market appeared to turn a corner early last year, helped by steady job creation and extremely low interest rates.

July’s increase was the fastest pace of sales since November 2009, when a home buyer tax credit was expiring. Such a strong rate of growth could prove temporary, however.

Applications for mortgages to buy homes rose slightly last week, but they have fallen sharply since the spring and remain near a seven-month low, a separate report from the Mortgage Bankers Association showed.

“We expect to see some moderation in activity in the coming months, as higher mortgage rates take some of the air from the recovery,” said Millan Mulraine, an economist at TD Securities.

Since early May, interest rates for 30-year mortgages have risen more than a percentage point. Last week, the average rate for a 30-year mortgage climbed 12 basis points, or hundredths of a percent, to 4.68 percent while refinancing activity slumped, the Mortgage Banker Association said.

The Fed is currently buying $85 billion a month in Treasury and mortgage-backed bonds, but it is expected to scale back purchases as early as September.

Economists polled by Reuters had expected home resales to increase to an annual rate of 5.15 million units in July.

The median price for a previously owned home rose 13.7 percent in July from a year earlier to $213,500. The inventory of unsold homes on the market rose 5.6 percent, for an unchanged 5.1-month supply.

Article source: http://www.nytimes.com/2013/08/22/business/economy/rising-rates-did-little-to-curb-july-home-sales.html?partner=rss&emc=rss