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August 21, 2014 10:05 AM, EDT
Sales of Previously Owned Homes Climb to 10-Month High
Daniel Acker/Bloomberg News

Purchases of previously owned U.S. homes rose in July to a 10-month high as low borrowing costs and an increase in inventory drew buyers.

Existing home sales climbed 2.4% to a 5.15 million annual pace, the most since September, from a revised 5.03 million pace in June, the National Association of Realtors reported.

The median forecast of 74 economists in a Bloomberg News survey called for 5.02 million. The number of homes for sale was the highest in almost two years.

Employment growth, rising property values and a decline in consumer debt are giving would-be buyers the confidence to take the plunge into real estate. Builders are also showing signs of life after a construction lull at the start of the year, a sign that the market’s momentum is sustainable.

Housing is “going to continue to pull up,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, who accurately forecast the increase in sales. “The labor market continues to improve, interest rates are low, affordability is high.”

Estimates in the Bloomberg survey of economists ranged from a sales pace of 4.85 million to 5.17 million. The June figure was revised from a previously reported 5.04 million.

The median price of an existing home rose 4.9% to $222,900 in July from $212,400 a year earlier, the report showed.

The number of existing properties for sale climbed to 2.37 million, the most since August 2012. At the current pace, it would take 5.5 months to sell those houses, matching the May and June reading. Inventory was up from 2.24 million a year earlier.

Distressed property sales, including foreclosures, accounted for 9 % of the total last month, the least since records began in 2008, the group said.

“There is significant pent-up demand that has yet to reach the marketplace,” NAR Chief Economist Lawrence Yun said at a news conference as the figures were released. “We are in a multi-year housing market recovery.”

Existing home sales, which are tabulated when a purchase contract closes, are recovering from a 13-year low of 4.11 million in 2008 after reaching a record 7.08 million in 2005.

The housing rebound has been giving mixed signals this year after a frigid and snowy winter and gradual improvement in the labor market. Residential construction starts increased in July to an annual pace of 1.09 million units, the highest level in eight months, as permits for future projects advanced 8.1%.