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Most economists expect the housing recovery will continue, albeit at a slower pace. "We've been spoiled by low rates," Greg McBride, senior financial analyst at Bankrate.com. "People are gnashing their teeth now over a rate we had never seen four years ago." He notes that, based on their figures dating back to 1985, rates on the 30-year loan had never sunk below 5 percent until 2010. The impact of higher mortgage rates has surfaced in the new-home market faster than the re-sale market because the new-home sales are measured when contracts are signed. Higher rates may have also caused potential buyers to cancel some purchases of new homes. Vitner says that may explain why sales were revised down in May and June. Most of the revisions occurred in sales of homes not yet under construction. Buyers don't need mortgages until construction begins. Sales of previously occupied homes reached a nearly four-year high last month. But that report measured completed sales, which typically reflects mortgage rates locked in a month or two earlier. The jump likely reflected a rush by home buyers to lock in lower rates. Next week, a measure of contract signings in July will be released. Many economists expect that will drop. Fed officials are closely watching the impact of higher mortgage rates on the housing recovery. The drop in sales could strengthen the hand of those Fed members who want to delay reducing the bond purchases. Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the homebuilders association. "The spike in mortgage rates is slowing the pace of improvement," Dan Greenhaus, chief global strategist for BTIG, an institutional brokerage, said in an email. "Given the speed at which housing was improving, and the growing talk of a renewed bubble, some moderation, assuming it doesn't materially worsen, is not a terrible outcome."
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