“The size of the increase was a surprise,” given the number of people applying for mortgages has dropped sharply since rates began to rise in early June, said Patrick Newport, an economist at IHS Global Insight. Sales are likely to “plunge” in August to offset July’s surge, he said.
Mortgage rates have been rising steadily since June as investors worried that the Federal Reserve could begin scaling back its stimulus program this year — a fact that has not been lost on global markets and has helped drive bond yields up. Minutes of the central bank’s last policy meeting, released Wednesday, reaffirmed its plans to scale back its bond-buying program, although Fed members were still divided over the timing.
Mortgage rates have stabilized in the past two weeks after touching a two-year high of 4.51 percent in July. The average rate for a 30-year fixed-rate mortgage was 4.4 percent last week, according to Freddie Mac, the mortgage financing company.
Home prices have also been rising for more than a year, driven by a tight inventory of homes for sale and buyers looking to take advantage of mortgage rates that remain historically low. The inventory of listed homes fell 5 percent compared with a year ago, while the median home price rose 13.7 percent to $213,500, according to the NAR report.
Existing-home sales reached a seasonally adjusted 5.39 million annual rate in July, up from 5.06 million in June. Distressed home sales, including foreclosures, made up 15 percent of all sales, the lowest level since October 2008, said Lawrence Yun, chief economist at the National Association of Realtors.
July’s sales report is another strong indicator of the housing recovery — but there is still a ways to go, Yun said.
New-home construction activity has ticked up in response to the low housing inventory, but it is still not close to meeting demand, he said. In addition, rising mortgage rates have priced some buyers out of the housing market and may continue to do so, Yun said.
Sales in the South, which includes the Washington area, increased 5 percent from June and are up 16.6 percent from a year ago. The median home price in the South was $183,400, 13.6 percent higher than a year ago. A separate report released Tuesday by real estate Web site Zillow said home prices in the D.C. area rose 8.2 percent in July compared with last year.