Dow Jones
Sales of previously owned homes rose unexpectedly in August to the highest level since 2007, an indication that potential buyers were rushing to lock in deals before mortgage rates rose further.
Existing-home sales rose 1.7 per cent in August from a month earlier to a seasonally adjusted annual rate of 5.48 million, the National Association of Realtors said Thursday. That was the best month of sales since February 2007, when home values were just beginning to decline from the housing bubble. The pace was 13.2 per cent higher than last year at the same time.
"This is partly due to the rise in interest rates, which again hurries some of the people into making the decision," said Lawrence Yun, chief economist for the Realtors' group. August is a lagging indicator of activity in June and July, when rates began their ascent, he said.
Economists had predicted sales would fall to a pace of 5.25 million in August. July's figure was unrevised at a 5.39 million pace.
Still, Mr Yun warned the surging home sales pace could be the "last hurrah" for the next 12 to 18 months as rising rates and home prices start to hold back buyers. Already, Realtors are seeing a decline in tours of homes.
A strong housing market has helped buoy the economic recovery by improving confidence among consumers, encouraging household spending and generating construction jobs.
Rising mortgage rates this summer have sparked a rush to buy homes as prospective homeowners want to lock in rates before they rise further. The average rate on a 30-year fixed-rate mortgage was 4.57 per cent last week, according to mortgage giant Freddie Mac, a level that is still historically low but well above the below-3.5 per cent rate in the spring.
Rates have been increasing in recent months as speculation grew that the Federal Reserve would start winding down its $85-billion-a-month bond-buying program, which was designed in part to push down long-term interest rates. But Wednesday, the central bank said it would keep its program in place as it waits for more evidence that the economic recovery will be sustained.
Other risks threatening a slowdown in the housing market are looming. Homebuilders said earlier this week their confidence paused in September, though it remains at nearly an eight-year high. A survey by the National Association of Home Builders said builders are increasingly seeing hesitancy from potential buyers, largely due to the rising mortgage rates.
Home prices are rising, likely as demand grows for the low stock of homes available for sale.
The Realtors group said Thursday that the median price of an existing home was $212,100, up 14.7 per cent from a year earlier, its strongest gain since October 2005.
And inventories remain tight of previously owned homes. The number of homes available for sale in August rose 0.4 per cent from July to 2.25 million. Still, the figure was down 6 per cent from a year ago. He expects inventories to tighten further into the winter.
Home builders and economists, including Mr Yun, have said more homes are needed to meet increasing demand.
"There is an ongoing shortage of inventory on the market," Mr Yun said Thursday. "I don't anticipate this housing shortage to go away," adding that that could push up prices further.
On Wednesday, the Commerce Department said single-family new-home construction was up 7 per cent in August from a month earlier and permits for single-family homes, an indicator of future construction, rose to their highest level since May 2008.