Remember earlier this year when interest rates started to rise and everyone worried that it spelled the end of the housing recovery? As interest rates have crept up for long-term mortgages throughout much of the summer, many have speculated the impact on home buying as inevitably negative.
However, we’re not seeing much evidence to support that.
Mortgage rates have continued to be really attractive throughout the year, with rates on the 30-year fixed-rate mortgage averaging 4.32% in Freddie Mac’s survey last week, down from 4.5% the previous week. It marked the lowest level for rates since the week ending July 25.
Although rates on long-term mortgages are still higher than they stood a year ago, it’s amazing how low they’ve remained and how it has yet to completely derail buying activity, as some expected.
In fact, the market for new homes and existing homes each continue to flourish, with some expected slowdown.
Sales of new single-family homes rebounded in August, climbing 7.9% in August to a seasonally adjusted annual rate of 421,000, after a 14.1% decline in July. August sales were 12.6% higher than the same month a year ago.
Meanwhile, new home inventory levels rose for the seventh straight month in August, with the number of new homes for sale rising 3.6% from July.
The heat was also felt in existing home sales, which reached their highest level in over six years in August – an annual rate of 5.48 million.
The one indicator that has shown slower activity – not surprisingly – is pending sales. Pending sales track homes that are under contract, but not closed transactions. For that reason, it’s a highly watched number that can help to indicate where the market is heading in the coming months.
NAR’s Pending Home Sales Index fell 1.6% in August to 107.7, down from a reading of 109.4 in July, but still 5.8% above August 2012. A drop in pending sales comes with little surprise as markets tend to slow after summer – especially after a remarkable one.
We’ll continue to keep an eye on interest rates. They may rise a bit more this year, but it’s safe to say now that a bump in mortgage rates didn’t dent housing’s summer.
By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.