Last week, the Realtors’ group said sales of previously owned homes jumped in July to the second-highest level in more than six years as buyers rushed to lock in mortgage rates before they increased any more. Purchases advanced 6.5% to a 5.39 million annual rate, the strongest since a government tax credit temporarily boosted demand in November 2009.
The group said it expects existing-home sales to reach about 5.1 million this year and 5.2 million in 2014. Some 4.7 million previously owned homes were sold in 2012.
While rising mortgage rates may initially stimulate demand, the appeal may wane as higher costs push potential buyers out of the market. The average rate for a 30-year fixed mortgage was 4.58% in the week ended Aug. 22, the highest level since July 2011.
At the current rate, the monthly payment on a $250,000 30- year loan is about $1,279. That compares with a $1,096 payment in November, when the average rate reached a record low of 3.31%.
The recovery in the housing market has aided the economic expansion as buyers look to fill their homes with furniture and appliances. La-Z-Boy Inc., a Monroe, Michigan-based maker of living-room recliners, reported fiscal first-quarter earnings that more than doubled from the year before, topping analysts’ estimates.
“With housing and consumer confidence trending upward, we are optimistic about the future of La-Z-Boy,” Chief Executive Officer Kurt Darrow said on an Aug. 21 conference call. The wood portion of the furniture industry will be the “biggest beneficiary as housing continues to strengthen,” he said.
Economists consider pending home sales a leading indicator because they track contract signings. Existing home sales are tabulated when a contract closes, usually a month or two later.