With August existing-home sales up 1.7% on a monthly basis, many are wondering if this is just the tip of the home-sales iceburg after the Fed’s decision Wednesday to continue purchasing additional agency mortgage-backed securities at its current pace to foster the ongoing housing recovery and fight unemployment.
At a nearly seven-month high, existing-home sales reached 5.48 million units in August, up from 5.39 million in July and up from 4.84 million in August 2012.
Now that the Fed has decided not to taper, analysts are expecting mortgage rates to return to lower levels, which in turn lays out expectations for yet another spike in home sales.
But Stan Middleman, CEO of Freedom Mortgage, expects little impact on the market due to the high volume of cash sales, which are not influenced by rates. "One of the things you have to take into account is, over the last year, somewhere between 40-50% of total sales have been cash, which would feel very little impact from mortgage rates," said Middleman.
Middleman added that further down the road looking ahead to 2014, the number of real estate transactions will begin to pick up — more of which require a mortgage versus investor-bought homes — and they would be subject to interest rate fluctuations.
However, Brian Koss, executive vice president at Mortgage Network, believes we may not see the Fed’s decision reflected in the existing-home sales report for some time. "I think this is a lagging number because it does deal with homes closed and knowing the length of time and process," he said.
"A lot of these deals have gone under either before rates went up or when they started to go up," Koss added.
Koss noted that existing-home sales are unlikely to see an impact from the no-taper decision, with factors such as seasonality and a lack of first-time homebuyers playing into the upcoming numbers. “There’s not that great groundswell of first-time buyers coming in," said Koss.
He doesn’t expect that the potential slight dip in interest rates is going to help the market that much. It just helps enough to reenergize and give us a bit of a boost during the fall, Koss noted. "We’re not expecting a whole lot going into 2014."