July Existing Home Sales Surge Despite Higher Rates
Aug 21st, 2013 @ 7:40 PM by Amber Nelson
Even as mortgage interest rates rose to their highest level in two years, homebuyers flocked to the scene in July, helping existing home sales grow on a yearly basis again for the 25th month in a row.
Total sales of existing U.S. homes rose 6.5 percent in July to a seasonally adjusted annual rate of 5.39 million, according to the National Association of Realtors, up from 5.06 million in June and up 17.2 percent from the previous year.
Meanwhile, interest rates on a long-term mortgages spiked, with the national average on a 30-year fixed rate loan climbing to 4.37 percent in July, up from 4.07 percent in June. That marks the highest point since July 2011 and it’s up dramatically from 3.55 percent last year at the same time.
“Mortgage interest rates are at the highest level in two years, pushing some buyers off the sidelines,” said NAR chief economist Lawrence Yun in a statement. “The initial rise in interest rates provided strong incentive for closing deals. However, further rate increases will diminish the pool of eligible buyers.”
The median home price continued its upward trek last month, reaching $213,500, up 13.7 percent from July 2012 and the 17th consecutive month of price increases.
Part of the reason prices rose again was the decline in the number of distressed sales in the marketplace. Foreclosures and short sales made up just 15 percent of July sales, unchanged from June but the lowest on record since the NAR started tracking in October 2008. Distressed properties typically sell for a significant discount and downwardly skew the median price.
While rising mortgage rates and prices will certainly push some buyers out of the market over the next year, the NAR believes there is still reason to expect solid gains in housing. Said Yun, “Although housing affordability conditions will become less attractive, jobs are being added to the economy, and mortgage underwriting standards should normalize over time from current stringent conditions as default rates fall.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.