Sales of existing homes reached a six-year high in August, rising 1.7 percent from the previous month and more than 13 percent from a year ago, according to industry data released Thursday.
The rise in sales, which surprised analysts, shows that increasing mortgage rates did not significantly weaken the housing market, as economists had feared. Instead, buyers rushed to lock in relatively low mortgage rates, contributing to a spike in sales, economists said.
But the uptick in sales may be temporary.
Sales will probably slow in the coming months as higher mortgage rates make a home purchase unaffordable for more buyers, economists said. “We’ll see much weaker sales in September and October,” said Patrick Newport, an economist with IHS Global Insight.
The housing market has been one of the strongest sectors of the economy, as high demand and tight supply have pushed home prices upward. Nearly 5.5 million existing homes were sold in August on a seasonally adjusted basis, up from 5.4 million in July and 4.8 million a year ago, according to a report from the National Association of Realtors. In the South, which includes the Washington region, August sales rose nearly 4 percent from the previous month and were up 13.5 percent from a year ago.
Economists continue to expect that rising rates will eventually hamper the market.
The average rate for a 30-year, fixed-rate mortgage reached 4.5 percent last week, according to data released Thursday by mortgage giant Freddie Mac. Rates are still low by historical standards but are moving in the wrong direction for many home buyers.
Rates have been climbing above 4 percent since June, as investors feared that the Federal Reserve would soon begin scaling back its $85 billion bond-buying program. The Fed surprised many investors Wednesday when it said it would continue the economic stimulus program for now, implying that the country’s economic recovery has a long way to go.
The Fed’s announcement means that mortgage rates may stabilize for a few weeks, but that is temporary, said Lawrence Yun, chief economist at the National Association of Realtors. “We are clearly in a rising interest rate environment,” he said.
Another concern for potential buyers: There aren’t enough homes for sale.
The housing inventory increased about half a percentage point, to 2.3 million homes, in August. But it would take just 4.9 months to sell all of the homes on the market at the current rate. That is down from 5 months in July. A healthy housing market should have a six-month supply, according to economists.
For now, the housing market continues to recover. There are fewer distressed sales, for example. Foreclosures and short-sales made up 12 percent of sales in August, down from 15 percent in July and 23 percent from a year ago.
Also, home prices continue to rise at a quick pace. Home prices rose 14.7 percent in August compared with a year ago, reaching a median of $212,100, according to the NAR report. Prices will continue to rise at double-digit rates through the rest of the year, although higher mortgage rates will temper the pace, Newport said.