Purchases of previously-owned homes probably fell in August as mortgage rates at a two-year high began to slow the progress in U.S. residential real estate, economists said before a report this week.
Contract closings fell 2.6 percent to a 5.25 million annualized rate from the highest level since November 2009, according to the median forecast of 62 economists in a Bloomberg survey ahead of National Association of Realtors data due on Sept. 19. Another report is projected to show home construction starts rose in August, reflecting orders in the months preceding the run-up in interest rates.
Rising borrowing costs may temper the pace of the housing rebound that’s been a mainstay of the economy. Federal Reserve policy makers meeting this week will decide whether the expansion and labor market have improved enough to warrant scaling back purchases of government and mortgage securities.
“The recent jump in mortgage costs will moderate the pace of the housing recovery but not derail it,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “The Fed is likely to go ahead with tapering. Borrowing costs could ease a bit between now and year-end as the market digests the idea that the Fed’s decision is not a tremendously negative event.”