Rising Mortgage Rates Show Impact

July 30, 2013

Rising mortgage rates are beginning to impact the housing market, as pending home sales declined in June after reaching the highest level in more than six years, according to the National Association of REALTORS®. The Pending Home Sales Index, a forward-looking indicator based on contract signings, fell 0.4 percent to 110.9 in June. That's down from 111.3 in May but still 10.9 percent higher than June 2012.

“Mortgage interest rates began to rise in May, taking some of the momentum out of contract activity in June,” said NAR chief economist Lawrence Yun. He noted that a persistent lack of inventory also contributed to lower contract signings.

Some home buyers have backed out of home purchases because of rising interest rates, Yun said. “There are some homebuyers who sign contracts with strong lender commitment letters, but have floating mortgage interest rates.  Those rates can be locked as late as 10 to 14 days before closing, so some home buyers may change their minds if the rate rises too much, which apparently happened with some sales scheduled to close in June,” he said.

NAR said it expects contract signings to be stable through the rest of the year, predicting existing-home sales will rise more than 8 percent. The median home price could also rise nearly 11 percent this year because of inventory shortages, NAR said.

Source: National Association of REALTORS®

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