If Home Sales Can Handle Higher Rates, So Can the Fed

By Qiong (June) Zhang36 Comments

http://finance.yahoo.com/blogs/breakout/home-sales-handle-higher-rates-fed-150434726.html

“Existing Home Sales Spike in July,” blares the headline from the National Association of Realtors. The organization’s enthusiasm is understandable as the latest data shows the pace of home buying in July not only came in better than expected and at the best level since November 2009, but more importantly rose in the face of sharply higher borrowing costs.

Beyond the 17% annual gain in sales, the NAR also reports that the median price for used homes rose nearly 14% to to $213,500, marking the 17th consecutive month of annualized gains, and leaves the benchmark just 7% shy of its all-time high set in July 2006.

In the wake of this evidence, and the certainty that the Fed will soon began to reel in its $1 trillion annual asset purchase program (perhaps as early as next month), a huge obstacle in the way of higher interest rates has just been moved.

To be fair, as strong as the July housing data was, even the NAR says the unexpected jump may have been partly due to people who were finally motivated to jump off the sidelines and act.

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