Housing sales up despite increased mortgages

WASHINGTON (AP)

Americans stepped up purchases of new homes in August after cutting back in July, suggesting that higher mortgage rates are not yet slowing the housing recovery.

Sales of new homes increased 7.9 per cent last month to a seasonally adjusted annual rate of 421,000, the Commerce Department said yesterday. That comes after sales plunged 14.1 per cent in July to a 390,000 annual rate.

The rebound in sales could ease worries that higher mortgage rates have started to dampen sales. It coincided with the best month of sales for previously occupied homes in more than six years. And homebuilders remain more confident in the market than they've been in eight years.

beating further rate hike

Still, some buyers may be racing to close deals before rates rise further. The average rate on the 30-year fixed mortgage has risen more than a full percentage point since May.

New-homes sales were 12.6 per cent higher in August than a year ago, although the pace remains well below the 700,000 consistent with a healthy market.

The number of new homes available for sale rose 3.6 per cent from July to 175,000. That's still relatively lean; at the August sales' pace it would take five months to exhaust the supply.