Existing homes, starts jump in July

NEW YORK—Still riding high despite a modest uptick in interest rates, the broad U.S. housing market remained relatively strong during July as sales of existing homes rose to a record high and housing starts climbed to their highest level in 17 years.

The only blip in the monthly picture was the highly volatile measure of new home sales — subject to frequent wide swings — which dipped by 2.9 percent during the month, giving up some of June's big 8.3 percent increase.

And rising interest rates, at least during the short term, may even have stimulated home buying during July, driving sales of existing homes, the largest segment of the housing market, up by 5.0 percent to an all-time record rate of 6.12 million units. "When mortgage rates first began to rise from record lows, it appears some buyers jumped into the market to take advantage of good affordability conditions before interest rates moved even higher," said David Lereah, chief economist of the National Association of Realtors.

But that may not last for long, and the market may have finally reached its peak. With mortgage rates moving up, if only moderately so far, Cathy Whatley, NAR president, expects second-half housing sales to be "somewhat slower than the record pace during the first half of this year."

Still moving on a fast track for a third straight month, the nation's home builders broke ground for new housing at an annual rate of 1.87 million units. With housing starts rising by 1.5 percent from June, home building hit a 17-year high, the Commerce Department reported. "Favorable interest rates, signs of an improving economy, healthy gains in home values and strong household formations are all fueling demand for new homes, and builders are responding to the times, said Kent Conine, president of the National Association of Home Builders.

The only misstep in the market was new home sales, which slipped by 2.9 percent, to a seasonally adjusted level of 1.17 million units, down from 1.20 million in June. In a big skewing effect, sales declined by 20.8 percent in the Northeast and by 166.3 percent in the West, offsetting a strong 17.3 percent increase in Midwestern states.