Sales of existing homes reached their highest volume in almost six years in August. The National Association of REALTORS reported Thursday that sales of existing homes rose 1.70 percent in August to a seasonally-adjusted annual rate of 5.48 million existing homes sold.
This was the highest number of existing home sales since February of 2007.
August's results exceeded estimates of 5.20 existing homes sold, which was based on July's unrevised reading of 5.39 million existing homes sold.
The NAR also reported that the national median home price increased to $212,100 in August. This represents a year-over-year increase of 14.70 percent and was the largest annual increase in the national median home price since October 2005.
Sales concentrated in areas with higher home prices contributed to this significant increase in the national median home price.
Homebuyers Increase Despite Higher Home Rates
The reading for existing home sales in August suggests that homebuyers are not shying away from higher home loan rates; it may also indicate that the recent shortage of existing homes for sale is beginning to ease.
August's higher number of existing home sales was attributed to home buyers anxious to lock in lower loan rates in an environment of rising mortgage rates. Also, economists had expected the Federal Reserve to begin reducing its monthly securities purchases, which did not happen.
Had the Fed tapered its securities purchases, long-term interest rates including mortgage rates, would likely have continued rising. The Fed may have decided not to reduce its monthly securities purchase in an effort to slow rising mortgage rates.
The average rate for a 30-year fixed rate mortgage has increased by more than one percentage point since May. Home buyers may respond to rising mortgage rates by delaying their home purchase to see if mortgage rates will fall, or they may rush to buy a home before rates go higher.
Mortgage Rates Affect Home Buyers In Three Ways:
1. As rates increase, monthly house payments also rise, which can impact affordability for first-time and moderate income buyers.
2. National unemployment rates remain higher than the Federal Reserve's target rate of 6.50 percent. While home prices are increasing and other facets of the economy are showing improvement, jobless claims remain higher than average.
3. Mortgage credit requirements are strict; this keeps some would-be buyers from qualifying for a home loan.
These factors are offset by high demand for homes and short supplies of available homes and developed lots in some areas.