Home Sales Spike as Rising Rates Push Buyers 'Off the Sidelines'

Home Sales Spike as Rising Rates Push Buyers 'Off the Sidelines'Existing-home sales rose big in July, with the median price — $213,500 — maintaining a double-digit increase from one year ago, according to the National Association of Realtors.
Total existing-home sales — completed transactions that include single-family homes, townhomes, condominiums and co-ops — increased 6.5 percent to a seasonally-adjusted annual rate of 5.39 million in July.
That’s compared to a downwardly revised 5.06 million in June.
Home resales are 17.2 percent higher than the 4.60 million-unit pace in July 2012. Sales have remained above year-ago levels for 25 months.
The national median existing-home price for all housing types was $213,500 in July, which is 13.7 percent above July 2012. There have been 17 consecutive months of year-over-year price increases, which last occurred from January 2005 to May 2006.
The median price has risen at double-digit rates for the past eight months, and is now 7.3 percent below the all-time record of $230,400 in July 2006.  Two years ago, the median price was 25.7 percent below the peak.
Lawrence Yun, NAR chief economist, said a shift to higher mortgage rates in the 4.5 percent range for the 30-year fixed is having an impact on the market.
“Mortgage interest rates are at the highest level in two years, pushing some buyers off the sidelines,” Yun said.  “The initial rise in interest rates provided strong incentive for closing deals.  However, further rate increases will diminish the pool of eligible buyers.”
But there are other factors that will contribute positively to the housing recovery, he said.
“Jobs are being added to the economy, and mortgage underwriting standards should normalize over time from current stringent conditions as default rates fall,” Yun said.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.37 percent in July from 4.07 percent in June. That’s the highest since July 2011 when it was 4.55 percent; the rate was 3.55 percent in July 2012.
Total housing inventory at the end of July rose 5.6 percent to 2.28 million existing homes available for sale, which represents a 5.1-month supply2 at the current sales pace, unchanged from June.
Listed inventory is 5.0 percent below a year ago, when there was a 6.3-month supply.
“Tight inventory in many areas means above-normal price growth for the foreseeable future,” Yun said.

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