Sales of existing homes bounced back unexpectedly in May, as home buyers continued to be encouraged by the strong job market and still-available financing despite higher interest rates.
Existing home sales rose 4.3% in May to an annualized sales rate of 5.09 million, a rebound from the sharp 6.2% dip that brought April's annualized rate to 4.88 million, the
National Association of Realtors
The consensus of economists polled by
had called for existing home sales to be unchanged in May.
Meanwhile, heavy demand for homes continued to push prices higher. In May, the average sales price for a home in the United States rose to $176,600 from $173,300 in April, the fourth straight month that average prices have risen.
The May rebound in home sales runs counter to recent arguments that the vibrant U.S housing market has seen a significant degree of slowing in response to rising mortgage rates.
Prior to the May rebound, the April drop in existing home sales provided evidence, along with 5.8% drop in new home sales and 3.9% drop in housing construction starts, that the housing market was slowing down sharply as mortgage rates moved higher.
But the May data suggested that slower activity in April might have merely been a result of fewer homes for sale rather than a pullback by home buyers because of higher interest rates.
"After setting a record low in January for the number of homes available for sale, many buyers were frustrated in early spring because there simply weren't enough homes on the market," said Dennis Cronk, president of the Realtors association. "Many homes listed in March and April received quick offers, resulting in a higher number of transactions closed in May."
Despite the still-strong market, the association projects that higher rates will continue to push home sales lower in the second half of the year, suggesting that the housing market has passed its peak.
Over the past year,
policy makers have raised short-term interest rates, which act as a basis for other rates, six times for a total of 1.75 percentage points. In its effort to keep inflation at bay, the Fed has been seeking to slow some areas of the U.S. economy that it thinks are growing too fast.
The Fed's efforts have sent mortgage rates significantly higher. According to mortgage giant
, the rate for a typical 30-year fixed mortgage averaged 8.52% in May, compared with 8.15% in April and 7.15% in May 1999. Rates have since cooled, largely because of a recent calm in financial markets, and they averaged 8.14% in the week ended June 22.
The Fed's policymakers will meet on Tuesday and Wednesday, and they are expected to leave interest rates unchanged in response to signs that consumers have slowed retail spending over the past several months and that the housing markets have fallen from their peak. But some economists contend that the Fed will face a tough decision on rates, especially given the rebound in May home sales.
Home sales in May moved higher across the country, with sales rising 1.7% in the Northeast, 7.5% in the Midwest, 3.6% in the South and 3.9% in the West.