National Association of Realtors chief economist Lawrence Yun noted the rising mortgage rates pushed some buyers into the market.
“The initial rise in rates provided strong incentive for closing deals. However, further rate increases will diminish the pool of eligible buyers,” Yun said.
The Realtors reported Wednesday that sales of existing single-family homes rose to a 5.39 million seasonally adjusted annual rate in July from a 5.06 rate in June.
It is the first time sales have been above the 5 million mark for three months in a row since July 2007.
Sales are up 17.2% from a year ago and the July $260,100 median sales price is up 10.1% from July 2012.
NAR economists attribute some of the price gains to lower sales of distressed properties. Foreclosures and short sales accounted for just 15% of sales in June and July—the lowest level since the Realtors began tracking distressed sales in October 2008.
Individual investors accounted for just 16% of sales in July, compared to 22% back in February.
“With a steady decline in lower-priced inventory, particularly foreclosures, investors are finding fewer bargains to buy,” NAR president Gary Thomas said.
Investors generally use cash to purchase distressed properties and turn them into rentals. However, all-cash sales comprised 31% of all transactions in July.
NAR spokesman Walter Maloney noted the Realtors are seeing seniors trading down to smaller, easier-to-maintain homes. “The lion’s share of those transactions are cash,” he said.
A lot of vacation home sales are cash deals as well as purchases by foreigner buyers.
“Anecdotally, we are hearing about parents paying cash for a house for their kids,” Maloney said. The parents are “giving their kids a loan that they might not be able to get from a lender.” And the parents probably can get a better return than other investments.
First-time buyers accounted for 29% of home purchases in July, down from 34% a year ago.