The housing market appears to show continued strength amid news of rising existing home sales in August. The month saw an increase in existing home sales of 1.7%, an annual rate of 5.48 million units, beating economist projections of a 5.25 million-unit rate according to a poll by Reuters. The new level of home sales reached in August is the highest it has been since February of 2007, however, economists caution that the rise in existing home sales may be attributable to the increase in interest rates over the past few months.
Interest rates have risen over a 100 basis points for 30 year fixed-rate mortgages from their low in May of 3.35%, to 4.5% as of September 19th. The rise in interest rates may be pushing some home buyers to purchase now to secure low interest rates. With the increase in demand and a shortage of units, the market has also seen the median home sales price rise 14.7% in August since last year to $212,100. This may also be pushing some buyers to act now before home prices rise even more. Due to these motivations home sales may experience instability over the next few months as buyers negotiate fluctuations in interest rates and home prices.