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Existing home sales slip
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August 25, 1999: 11:07 a.m. ET
Higher mortgage rates wilt demand, but not as much as economists expected
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NEW YORK (CNNfn) - Sales of existing homes fell off their record high pace during July in the face of higher mortgage rates, but still managed to close the month stronger than expected, the National Association of Realtors reported Wednesday.
The seasonally adjusted annual rate of existing home sales fell 3.9 percent during July to 5.41 million units. While that was off June's revised record high rate of 5.63 million homes, it still easily surpassed the 5.31 million unit sales analysts surveyed by Reuters had expected.
The NAR also noted the rate of existing home sales, while declining, still remains on pace to shatter 1998's record pace of 4.97 million units sold.
"Keeping everything in perspective, I think the important thing to note is that our industry remains on pace to top last year's record for sales by a wide margin," said Sharon Millett, NAR's president.
Still, economists said they expect the level of existing home sales to continue to decline, particularly in light of the Federal Reserve's decision Tuesday to raise short-term interest rates for the second time in two months.
While the Fed's action does not directly impact mortgage rates, lenders generally move their rates in accordance with the Fed's so-called federal funds rate. Even before Tuesday's rate hike, mortgage rates already were bumping up against the 8 percent level many economists call the "psychological barrier" where home sales tend to slow significantly.
"It is going to slow the housing more than it already has," said Stephen Slifer, chief U.S. economist at Lehman Brothers. "The number of people that are looking [at houses] have come off by a fair chunk, from the data we've received, so that should start to slow the housing market a good bit as well."
Still, at least through July, the housing market remained tight. The NAR reported only 1.91 million homes remained on the market at the end of July, down from the 2.06 million recorded during June.
The median price of existing homes sold during July also fell slightly to $135,400 from $136,900 in June, but the price was still well above the $131,900 median posted during July 1998.
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