The housing boom won't go away quietly.
Despite much higher mortgage rates, sales of new homes rose to a seasonally adjusted annual rate of 980,000 in July, the second highest level ever after last November's 985,000, the Commerce Department said Monday.
June sales were revised higher to a 979,000 pace from 929,000. So far in 1999, 577,000 new homes have been sold, 6 percent more than at this time last year
Sales of existing homes -- at 5.41 million -- were also strong in July, a real estate industry association reported last week.
A panel of economists surveyed by CBS.MarketWatch.com expected sales to fall to 916,000.
The housing boom has been one of the main engines of economic growth in the late stages of the expansion. Home sales usually spark related sales of furniture, appliances, hardware, gardening supplies and home furnishings. The length and strength of the housing boom has perplexed economists, who thought demographic trends would limit the demand for new homes.
Obviously, the wealth from the stock market and strong job growth have boosted the demand for housing. A record percentage of Americans now own their own home.
The economists believed the increase in mortgage rates, which preceded the Federal Reserve's tighter monetary policy, would eventually stall housing sales. Typically, higher rates initially cause a jump in sales as potential buyers decide to buy immediately before rates go even higher. That lock-in effect could have boosted sales in June and July.
Home builders have been busy meeting the demand for housing. The stock of unsold new homes remained at a very tight 3.8-month supply at current sales rates. The number of unsold homes rose to 311,000, the highest since December 1996, perhaps the only part of the report that moderated its strength. Builders may slow down their new construction if they feel the supply is getting too big.
Regionally, sales climbed 34 percent in the Northeast to 83,000 and 10 percent to 178,000 in the Midwest. Sales rose 1,000 to a record 470,000 in the South and fell 13 percent to 249,000 in the West.
The median sales price rose $1,000 to $156,000 while the mean (or average) sales price fell to $186,000 from $190,700.
Written By Rex Nutting, CBS MarketWatch