U.S. home sales unexpectedly rose to a 17-month high in August for a second straight month of gains, the latest sign that lower mortgage rates are encouraging buyers off the sidelines.
The National Association of Realtors said on Thursday existing home sales increased 1.3% to a seasonally adjusted annual rate of 5.49 million units last month. July's sales pace was unchanged at 5.42 million units.
Economists polled by Reuters had forecast existing home sales declining 0.4% to 5.37 million units. Existing home sales make up about 90 percent of U.S. home sales.
A decline in mortgage rates throughout much of the summer has helped buyers. The U.S. Federal Reserve cut interest rates for the first time in more than a decade in July and lowered borrowing costs again on Wednesday.
The 30-year fixed mortgage rate has dropped to around 3.5% from a more than seven-year peak of about 4.94% in November, according to data from mortgage finance agency Freddie Mac. Buyers are also benefiting from an economy with low unemployment, rising wages and slower house price inflation.
But home sales overall have seesawed on a monthly basis for much of this year as the industry continues to struggle with a lack of supply, especially for cheaper homes.
Land and labor shortages have also curtailed building although there have been recent signs of easing. On Wednesday, data showed U.S. homebuilding surged to a more than 12-year high in August as both single- and multi-family housing construction accelerated.
"Having the mortgage rates low for several consecutive months, this is enticing buyers back into the market," said NAR Chief Economist Lawrence Yun.
Existing home sales rose 2.6% from a year ago, NAR said, which was the second consecutive month of year-on-year gains. Across the nation's four regions, all saw growth from a year ago. On a monthly basis, sales jumped 7.6% in the Northeast and there was an increase of 3.1% in the Midwest. Sales also rose 0.9% in the South but declined 3.4% in the West.
The median existing house price increased 4.7% from a year ago to $278,200 in August. There were 1.86 million homes on the market in August, a decline of 2.6% from a year ago.
At August's sales pace, it would take 4.1 months to clear the current inventory, down from 4.3 months one year ago. A supply of six to seven months is viewed as a healthy balance between supply and demand.