Americans stepped up their home-buying for a third straight month in July, as sales accelerated to the strongest pace in eight years.
The National Association of Realtors said Thursday that sales of existing homes rose 2 percent last month to a seasonally adjusted annual rate of 5.59 million, the fastest rate since February 2007. Sales have jumped 9.6 percent over the past 12 months, while the number of listings has declined 4.7 percent.
The median home price climbed 5.6 percent over the past 12 months, to $234,000.
Just 28 percent of the purchases last month went to first-time home buyers, a group that historically accounted for 40 percent of sales.
Two critical factors in the recent sales explosion: the economy adding a solid 2.9 million jobs over the past 12 months, and the average 30-year fixed mortgage rate staying around 4 percent. At roughly two percentage points below the historical level, mortgage rates have reduced monthly borrowing costs for buyers.
Still, the trajectory of mortgage rates – and sales – going forward is unclear.
It’s possible that a weakening global economy will cause more investors to buy U.S. Treasury bonds, a move that has historically held down mortgage rates. The average mortgage rate has slipped slightly as China has endured stock-market volatility and reduced the value of its currency.
Yet the Federal Reserve is preparing to raise a key interest rate for the first time in nearly a decade. Economists say the Fed could lift its fed funds rate from near-zero as soon as September, an increase that would potentially cause mortgage rates to rise. When Fed officials previously announced plans in 2013 to pull back on other forms of economic stimulus, mortgage rates suddenly spiked and derailed home sales for several months.
The July sales increase occurred in the South and West. Home purchases remained unchanged in the Midwest and slipped in the Northeast.
Despite the higher sales, more Americans are choosing to rent. So far this year, the share of the U.S. population that owns homes has fallen to 63.4 percent, a 48-year low, according to the Census Bureau.