Strong existing-home sales in August may result in weaker numbers in the coming months if buyers rush to close deals anticipating higher interest rates.
Existing-home sales increased 1.7% in August from July, the National Association of Realtors said Thursday.
Expect to see "payback" in September and October, says Patrick Newport, IHS Global Insight economist. Interest rates started rising in May and pushed buyers to close deals, he says.
Total existing-home sales in August rose to a seasonally adjusted annual rate of 5.48 million from 5.39 million in July. They were 13.2% higher than a year ago, NAR says. That's the highest level in more than six years.
The market may be seeing a temporary peak, says Lawrence Yun, NAR chief economist. Monthly sales "are likely to be uneven in the months ahead," he says.
The Federal Reserve's decision Wednesday not to taper its purchase of mortgage backed securities, and to keep interest rates low, gives borrowers another "window of opportunity" to refinance mortgages or get home loans at still-low rates, says Doug Duncan, Fannie Mae chief economist.
The average rate for a 30-year-fixed rate loan was 4.5% for the week ended Thursday, up from 3.49% a year ago, Freddie Mac says. Rates drifted down from the week before amid signs of a weakening economic recovery.
The Fed's decision won't cause mortgage rates to plunge, says Bob Walters, Quicken Loans economist. He expects them to stay on the same trajectory of a "slow march higher."
Higher rates took the biggest bite out of refinancing. If rates temporarily trend lower, given the Fed's decision, the refi market could see the biggest bump, says Frank Pallotta, of finance company Loan Value Group. Some fence sitters may also be lured to buy, he says.
The August home sales numbers reveal a far healthier housing market than a year ago.
In August, foreclosed or short-sale homes accounted for just 12% of sales, down from 23% a year ago, NAR says.
The median single-family home price hit $212,000, 14.4% higher than a year ago. Tight inventory is limiting choices and helping prices, Yun says.
That may be especially true in the West, where August sales actually dropped 2.3% from July and median prices rose more than 18%.
Nationwide, the supply of homes for sale fell to 4.9 months in August from five months in July. Supply indicates that it would take that long for all homes to sell, at the current pace of sales, if no more came on the market.
In the past, new and existing home sales have dropped three months after interest rate spikes, says Trulia economist Jed Kolko. That didn't happen after May's spike, given a strengthening economy, slight expansion in for-sale inventory and some loosening in lending standards, he says.
Article curated from USA Today
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