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Tim Mullaney, USA TODAY

Existing home sales rose 6.5% in July, reaching their highest level in nearly four years, the National Association of Realtors said Wednesday.

Homes sold at a 5.39 million seasonally adjusted annual rate, the group said, handily beating economists' forecasts of a 5.15 million sales pace. The sales rate was up 17% from the same month last year.

July's sales rate was the highest since November, 2009 when houses sold at a 5.44 million annual rate.

"We haven't had three straight months of 5 million or greater since the second quarter of 2007,'' NAR spokesman Walter Molony said. "To go back and find a month with a higher sales volume, without the benefit of federal tax credits, you have to go back to March 2007.''

The median home price, where half of all homes are more expensive and half are less expensive, was $213,500, up 14% from last July. That was the biggest year-over-year gain since 2005.

The number of sales in the market may be slowed soon by higher interest rates, but tight inventories of homes for sale should keep prices rising, NAR Chief Economist Lawrence Yun said.

"Mortgage interest rates are at the highest level in two years, pushing some buyers off the sidelines," he said. "The initial rise in interest rates provided strong incentive for closing deals. However, further rate increases will diminish the pool of eligible buyers."

Interest rates on 30-year mortgages have risen by a full percentage point since May, driven by speculation about when the Federal Reserve will slow the pace of its bond-buying program. For the buyer of a median-priced house who puts 20% down, that raises the monthly payment by about $100.

"The bottom line is that the housing market remains in a recovery phase, albeit one that could be tempered by higher mortgage rates and worsening affordability,'' Barclays economist Michael Gapen said in a note to clients after the NAR released its report.

"The recovery in housing will prove resilient to any broader slowing in the economy and the recent rise in mortgage interest rates to date, but we will be watching for any signs of weakness or fragility as a result of the significant rise in real interest rates.''

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