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) -- Existing home sales rose to the highest level in six-and-a-half years in August, even as median prices rose nearly 15% year-on-year, defying expectations for a slowdown caused by rising interest rates.

The National Association of Realtors said total existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.7% to a seasonally adjusted annual rate of 5.48 million in August from 5.39 million in July, and are 13.2 % higher than the 4.84 million-unit level in August 2012.

Economists expected sales at the seasonally adjusted annual rate of 5.25 million, according to consensus estimates polled by


Sales are at the highest rate since February 2007 when they hit 5.79 million. Existing home sales have been higher from year-ago levels for 26 straight months.

The latest report is the first to fully capture the impact of the interest rate hike that began in May and continued in June.

The NAR's existing home sales report is based on closed transactions, which means they are based on contracts signed at least two months earlier.

As a result, previous reports did not fully reflect the impact the rate hike as they reflected buyer demand in March and April.

So the continuing gains in existing home sales is a surprise.

But NAR chief economist Lawrence Yun said the market may be at a "temporary peak".

"Rising mortgage interest rates pushed more buyers to close deals, but monthly sales are likely to be uneven in the months ahead from several market frictions," he said. "Tight inventory is limiting choices in many areas, higher mortgage interest rates mean affordability isn't as favorable as it was, and restrictive mortgage lending standards are keeping some otherwise qualified buyers from completing a purchase."

Total housing inventory at the end of August increased 0.4 % to 2.25 million existing homes available for sale. But sales still lag demand. At the current sales pace, it would take only 4.9 months to exhaust all supply, compared to 5 months in July. In a balanced market, it would take 6 months normally.

In some areas, supply is still so short that there is overbidding; 17% of all homes sold above the asking price in August, although 63% sold below list price.

The median time on market for all homes was just 43 days in August, little changed from 42 days in July.

The national median price for existing homes was $212,100 in August, up 14.7% from August 2012. This is the strongest year-over-year price gain since October 2005.

Some of the price increases can be explained by the shifting mix of homes. The share of distressed homes -- foreclosures and short sales -- represented just 12% of total sales, down from 23% in August 2012.

Still, a number of transactions are paid by cash, reflecting tight mortgage conditions and high demand from investors.

All-cash sales comprised 32% of transactions in August, up from 31% in July and 27% in August 2012. Three out of four investors paid cash.

First-time homebuyers accounted for about 28% of purchases, down from 31% a year ago.

In the coming months, inventory is expected to continue expanding, which would be good news for buyers. However, if interest rates continue to rise, buyers might stay away from the market and prices could moderate.

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