WASHINGTON -- Americans bought previously owned homes in October at the fastest pace in nearly a decade, helped out by low mortgage rates.
The National Association of Realtors said Tuesday that sales of previously owned homes rose 2 percent to a seasonally adjusted annual rate of 5.6 million. Sales reached their strongest pace since February 2007, a sign that the market is still healing from the collapsing prices and foreclosures that ignited the 2008 financial crisis.
A stable job market and historically cheap borrowing costs have spurred demand from homebuyers this year. But sales growth has been tempered somewhat by accelerating prices and a shortage of properties on the market. Sales gains could slow in the coming months as rising mortgage rates make home loans more expensive.
The October advance "may be indicative of pent-up demand that was unrealized in the summer," Lawrence Yun, chief economist at the Realtors group in Washington, told reporters as the data were released. More recently, "with the rise in rates, we may begin to see some modest reduction in home sales."
But Yun said that as long as there's job creation, the effect should be "minimal."
Falling mortgage rates helped sales for much of the year, but rates surged after this month's presidential election. The increase means that yearly debt payments for a median-priced home would increase by more than $500 on average for people attempting to buy homes in November and December.
Tuesday's report is very encouraging but "has to be seen in the context of the recent decline in mortgage applications, which if sustained likely will push home sales down sharply in the early part of next year," Ian Shepherdson, chief economist at Pantheon Macroeconomics Ltd., said in a note. "We expect further declines in demand as [interest] rates climb."
Investors expect the federal budget deficit to rise under the administration of incoming President Donald Trump, causing the yield on 10-year U.S. Treasury notes to reach roughly 2.3 percent.
The rising interest rates trickled into the housing market. The average 30-year, fixed-rate mortgage climbed to nearly 4 percent from less than 3.5 percent at the end of October. Few housing experts say that higher rates at this stage will fully disrupt sales, though they might cause some homeowners to stay in place rather than upgrade to new homes and costlier mortgages. The effect of higher rates could be offset if wages accelerate strongly during a Trump administration, giving Americans higher incomes.
Still, the supply crunch of the past year shows little sign of reversing itself.
Sales listings have fallen 4.3 percent over the past year to 2.02 million homes. The shortage has pushed up the median sales price of previously owned homes by 6 percent from a year ago, to $232,200.
At the current pace, it would take 4.3 months to sell the houses on the market, the quickest since January and down from 4.4 months in September; the Realtors group considers six months' supply as normal.
The low mortgage rates aided buyers with solid credit, although tighter lending standards appear to have hurt potential sales.
An analysis released this week by the Urban Institute, a Washington-based think tank, found that there could have been an additional 1.1 million mortgages issued in 2015 if traditional lending practices had been in place that put less emphasis on stronger credit scores.
The tighter credit standards have helped foster a housing market that prefers cash buyers and investors who may be more likely to rent homes to tenants than live in them.
Information for this article was contributed by Josh Boak of The Associated Press and by Shobhana Chandra of Bloomberg News.
Business on 11/23/2016