By Margaret Chadbourn
WASHINGTON -- U.S. home resales hit a 6½ year high in August as buyers flocked back to the market to lock in cheap borrowing costs amid rising mortgage rates, a signal of continued strength in the housing market recovery.
The National Association of Realtors said Thursday existing home sales increased 1.7 percent to an annual rate of 5.48 million units last month, the highest level since February 2007 when property values began to decline after the sector's boom and bust.
Economists polled by Reuters had expected home resales to rise to a 5.25 million-unit rate. The housing recovery has helped shore up the economy by bolstering household finances and supporting consumer spending.
Lawrence Yun, NAR chief economist, said the housing market may be experiencing a temporary peak as would-be buyers sitting on the fence are pushed to close deals ahead of likely price and borrowing cost increases.
"Rising mortgage interest rates pushed more buyers to close deals, but monthly sales are likely to be uneven in the months ahead from several market frictions," he said, pointing to tight inventory limiting choices in many real estate pockets.
Mortgage rates have risen in recent months after hitting a low of 3.35 percent in May, according to data from Freddie Mac. The rate for a 30-year fixed rate loan was at 4.5 percent as of Sept. 19, hovering near a two-year high.
The Federal Reserve cited tighter financial conditions as one reason for its decision this week not to taper its stimulus program aimed at supporting growth, a surprise to investors and economists who had expected it to scale back bond-buying. Slower asset purchases would have pushed mortgage rates even higher.
Last month, the inventory of unsold homes on the market increased slightly and represented 4.9 months' supply at August's sales pace, the NAR said.
"There's an ongoing housing shortage," Yun said, adding: "I don't anticipate this housing shortage to go away."
The months' supply remained below the 6 months that is normally considered as a healthy balance between supply and demand. The U.S. housing market had been impacted by tight supplies in some parts of the country.
The median home sales price in August rose 14.7 percent from a year ago to $212,100.
Distressed properties, foreclosures and short sales, which typically occur at deep discounts, accounted for about 12 percent of overall sales last month, the lowest since NAR began tracking the data in 2008.
Investors bought 17 percent of homes in August, with first-time buyers accounting for 28 percent of the transactions.
Rising home values and mortgage interest rates have started to price some first-time buyers out of the housing market and affect affordability.