Last week the National Association of Realtors (NAR) reported existing home sales figures for August at a 5.48 million seasonally adjusted annualized rate, beating the consensus expectation for 5.25 million. This is up 1.7% m/m after a 6.5% m/m jump in July and is the highest annualized pace since February of 2007. Areas hit the hardest by subprime crash are now showing the strongest gains. This positive data is somewhat offset by declining mortgage applications in recent months, which suggests the pace of sales in September may be significantly lower. The August report reflects the closing of transactions that started a month or even two months prior, when mortgage rates were lower than they are now. This is one of many reasons that the Federal Reserve surprised markets by announcing no change to its aggressive purchases of Treasury bonds and agency mortgage-backed securities. Another less positive trend in the underlying housing data is the falling share of purchases made by first-time buyers, which is well below the long run average and should be increasing if this were a broad based housing recovery. First-time buyers are necessary to keep the upward price momentum going but new buyers are being crowded out by investors who pay all cash and then turn properties into rentals. Although this was an impressive gain in August, even real estate bulls worry the recent rally might be coming to a plateau. According to an article in the Financial Times, Lawrence Yun, NAR chief economist, said the US may be witnessing the “last hurrah” as the jump in borrowing costs and prices hurts affordability. An ongoing housing recovery has been the core of most positive cases made on the economy, and is also clearly of high importance to the Fed. Any material softening in the market would be an incentive to keep monetary policy accommodative for longer.