Home sales: Can homes and rates rise together?

New home sales surged in May, and home prices soared in April, but rising mortgage rates threaten future gains, economists say. Home prices rose a record 12.1(PERCENT) in the year ending in April, according to the Standard & Poor’s Case-Shiller index released Tuesday. New home sales, meanwhile, reached their highest level in nearly five years. Sales rose 2.1(PERCENT) in May from April to a seasonally adjusted annual rate of 476,000, the Census Bureau said. The Case-Shiller data measure home prices from sales that happened before interest rates began to climb in early May. As of mid-June, rates averaged 4.17(PERCENT) for a 30-year-fixed rate loan for balances less than $417,500. That was up from 3.59(PERCENT) in early May. New figures are expected today from the Mortgage Bankers Association. While rates have gone up, some banks have also eased credit restrictions, which should keep housing’s recovery intact, says David Blitzer, chairman of the S&P index committee. Home buyers have survived rising mortgage rates in the past, he says, often by shifting from fixed-rate to adjustable-rate loans. Higher rates could be spurring some to buy before rates go higher, says Stew Larsen, executive vice president of Bank of the West. Yet, if 30-year-fixed rates remain above 4.5(PERCENT) — as they were Monday, based on a survey by mortgage tracker HSH.com — some buyers will be priced out of the home market, says Keith Gumbinger, HSH.com vice president. “If rates hold at these levels, there definitely will be an impact on home sales,” he says. Home price gains will certainly be affected by higher interest rates, says Stan Humphries, chief economist of Zillow. Rising rates, along with an increasing supply of homes for sale, will “help mitigate extreme price spikes caused by very strong housing demand and very low housing supply,” Humphries says. Year-over-year, all 20 cities in the Case-Shiller index showed positive gains. San Francisco led the way with prices up almost 24(PERCENT) year-over-year. Las Vegas prices increased more than 22(PERCENT). Phoenix prices rose almost 22(PERCENT), and Atlanta prices were up almost 21(PERCENT). New York saw the smallest year-over-year gain of 3.2(PERCENT), followed by Cleveland at 4.8(PERCENT). Compared with March, the Case-Shiller data showed April home prices up 2.5(PERCENT) for the 20-city composite. All cities except Detroit posted gains. Its April prices were flat with March. http://www.news-press.com/article/20130625/RE/130625026/Home-sales-Can-homes-rates-rise-together-