For much of the summer we have had reports of both rising interest rates and growing home sales. Does this really seem likely? Have we suspended the laws of supply-and-demand for real estate during the past few months?

Here's how such economic magic takes place:

First, interest is not the only factor impacting real estate sales and prices. A growing population, a strong local economy or a construction moratorium may create higher prices even as mortgage rates rise.

Second, the sale and interest reports that you read are no doubt true and accurate for the times covered -- but the times covered for home sales and mortgage rates are simply different.

When we talk about interest rates we mean today, now, this moment -- but when we discuss real estate sales we're often looking at information which may be several months old by the time it gains public attention.

Consider "July" home sales. Let's say a transfer of title was recorded on July 3rd. But, closing was a day or two earlier, say July 1st. Before there could be closing, there had to be a sale agreement. That agreement may well have been signed May 15th because in the usual case you won't have closing until 30-45 days after a sale contract has been signed. The result is that a transaction included in August sale reports may have actually been contracted in May, a time when interest rates and consumer perspectives were far different then late summer.

You can see this morning's interest rates on the Realty Times home page. It's a good index of mortgage costs, a general guide to what consumers are likely to find.

But what about the latest home sale data?

Published: September 2, 2003

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