Home sales hit high but could slow soon as mortgage rates climb
WASHINGTON — Home sales rose last month to the highest level since February 2007 as buyers rushed to close deals before mortgage rates increased further.
Yet the gain could represent a temporary peak if higher rates slow sales in coming months.
Sales of previously occupied homes rose 1.7 percent to a seasonally adjusted annual rate of 5.48 million in August, the National Association of Realtors said Thursday. That level is consistent with a healthy market.
August sales reflect contracts signed in June and July, when mortgage rates were rising steadily. The Realtors' group cautioned that buyer traffic dropped off significantly in August. That points to fewer sales in autumn.
Higher rates could also depress home buying next year, the Realtors' said. The group forecasts that sales will average 5.2 million in 2014. That's still better than the 4.19 million sales in 2010, when the housing market bottomed.
“We should expect some giveback in sales over the next several months,” said Thomas Feltmate, an economist at TD Economics.
Steady job gains and low mortgage rates have fueled a recovery in housing since early last year. But rates have risen since May and have begun to restrain housing's rebound.
The average rate on a 30-year fixed mortgage was 4.57 percent last week, near a two-year high and more than a full percentage point higher than in May.
That's when Federal Reserve Chairman Ben Bernanke suggested that the Fed could soon scale back its $85 billion monthly bond purchase program, which is intended to keep interest rates low.
On Wednesday, in a surprise, the Fed decided against reducing its bond purchases. It said one key reason for its decision was the sharp increase in mortgage and other interest rates. Pulling back on its bond purchases could have sent such rates even higher.
Many economists say the housing recovery should withstand the recent rate increase. Mortgage rates are still quite low by historical standards.
“While higher mortgage rates are likely to temper existing home sales over the coming months, it by no means will derail the housing recovery,” Feltmate said.
Other figures in the report were mixed. “Distressed” sales, which include foreclosures and homes with mortgages that exceed the home values, made up just 12 percent of sales. That was down from 23 percent a year earlier.
That means that traditional sales have risen 31 percent in the past year, said Paul Diggle, an economist at Capital Economics.
At the same time, potential homebuyers, particularly first-time purchasers, still appear to have difficulty qualifying for loans.
All-cash sales accounted for 32 percent of purchases, up from 27 percent a year ago. First-time buyers made up only 28 percent of sales, down from 31 percent a year earlier.
First-time buyers usually propel housing recoveries. But in recent years, they've struggled to meet higher credit standards. Many lenders also now require higher down payments.
The supply of available homes remains tight, the Realtors' group said. There were 2.25 million homes for sale last month, down 6 percent from a year earlier.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Plug-in Accord makes gas station visits rare
- EPA failing to stop natural gas pipeline leaks, internal watchdog says
- Citizens Bank parent says 6-month profit doubles
- Smartphone coupons just one way stores increasing spontaneous buys
- Amazon.com distribution center planned for Pittsburgh’s West End
- Market spins its wheels despite big moves in individual stocks
- Chrysler recalls up to 792K Jeep SUVs for ignition switch defect
- EQT posts $110.9 million profit in latest quarter
- Wesco posts higher profit, lowers full year outlook
- Income inequality narrower under Obama, analysis concludes
- Jobless rate unchanged as Pennsylvanians gave up search for work