Previously Owned U.S. Home Sales Rise to Highest Since 2009
The sales of previously owned U.S. homes climbed more than forecast in July to the fastest pace since November 2009 as more buyers entered the market before further increases in mortgage rates. Purchases of previously owned houses advanced 6.5 percent
to a 5.39 million annual rate last month, figures from the National Association of Realtors showed today in Washington. The median forecast of 76 economists surveyed by Bloomberg projected a 5.15 million pace. Prices increased 13.7 percent from a year earlier, the most since October 2005. Higher property values that allow more Americans to list their homes, job gains and still-historically low mortgage rates are underpinning demand. At the same time, bigger increases in borrowing costs threaten to slow the pace of improvement in housing, which has been mainstay of economic growth.
Higher borrowing costs encouraged more Americans to lock in rates before they head higher. The average rate for a 30-year fixed mortgage climbed to 4.4 percent in the week ended Aug. 15 from a record low of 3.31 percent in November, according to Freddie Mac. The increases in rates probably panicked some buyers. The higher borrowing costs probably provided a sense of urgency to close on home purchases for the period. Further increases in mortgage rates will likely reduce the pool of eligible homebuyers.
Existing-home purchases are recovering from a 13-year low of 4.11 million reached in 2008. Annual sales peaked at 7.08 million three years earlier in 2005. A total of 4.66 million previously-owned houses were sold in 2012. The Realtors group projects 5.05 million home sales this year. Sales climbed in all four U.S. regions, with the biggest gain in the Northeast.
Investors in July accounted for 16 percent of all existing-home sales, down from a peak of 22 percent in February. The pickup in borrowing costs may start to work to the advantage of some home-buyers, who have been competing with investors during the housing rebound. As interest rates rise investors have other avenues for their investment capital.
Assistant State Treasurer
Chief Investment Officer
State of Louisiana
Department of the Treasury