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Pending Homes’ Sales Slip From The 6-Year High Due To Increased Rates

Number of the Americans who did sign contracts for buying homes dropped during June from the 6-year high during May, one sign that the sales can stabilize over coming few months.

According to National Association of Realtors on Monday, its index adjusted seasonally for the pending homes’ sales dropped 0.4% to 110.9 during June. Reading of May was also revised lower around 1% point to about 111.3, though it still was the highest from December 2006.

This slight decline tells that higher rates of mortgage might be beginning to slow the sales. Still, the signed contracts happen to be 10.9% higher than one year ago. There’s generally lag of 1-2 months between completed sale and signed contract.
The economists were quite relieved after they saw only modest decline. According to them, this shows that higher rates of mortgage are only having small impact upon market of sale of homes.

Average rate over fixed thirty-year mortgage jumped full 1%point since the early May. It reached 2-year high with 4.51% during late June.

The rates increased after Ben Bernanke, the Chairman, said Federal Reserve can slow the program of bond-buying later in this year only if economy continues on to improve. Fed’s purchase of bonds has kept long-term rates of interest low, encouraging increased spending and borrowing.

In the recent weeks, other members of Fed as well as Bernanke have stressed any change within program of bond-buying would depend on health of economy, not any set date of calendar.

Since such comments, the rates of interest have declined. Average over the thirty-year mortgage happened to be 4.31% the previous week.

Even having higher rates of mortgage, the signed contracts rose in West the previous month. They stayed unchanged in Northeast but fell in Midwest and South.

Prices and home sales have climbed from around the beginning of last year and buoyed by the solid hiring as well as low rates of mortgage historically. Housing is one important economic growth driver this year since the other economy parts have languished, like manufacturing and business investment.

The sales of the homes previously occupied slipped in the previous month, after big increase during May to the highest of levels during three-and-a-half years.

But the sales of new homes jumped during June to fastest pace during 5 years, increasing confidence that housing recovery tends to be strengthening.

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