Sales of existing homes increased by a solid 6.5% in July, coming in at an annualized rate of 5.39 million homes. That was up from the downwardly revised 5.06 million homes sold in June. (Initially, the June figure had been estimated at 5.08 million units.) What's more, the July total exceeded the consensus estimate of 5.15 million houses. It was a most solid performance, and was especially impressive given that mortgage rates have been on the rise. The report was issued by the National Association of Realtors (NAR), a trade group.

Lawrence Yun, the chief economist for the NAR, said that changes in affordability are affecting the housing market. He intoned that ''mortgage rates are at the highest level in two years, pushing some buyers off the sidelines.'' He went on that ''the initial rise in interest rates provided strong incentive for closing deals.'' We probably are now seeing the impact of that move higher in rates.

Of course, we could get too much of a good thing, and should mortgage rates rise much further, we could well face a diminished pool of potential home buyers in the months to come.

Meantime, existing home sales, which are completed transactions that include single-family homes, townhouses, condominiums, and co-ops, in addition to rising modestly on a sequential-month basis in July, soared on a year-to-year matchup, jumping by 17.1% from the 4.60 million home rate in July of 2012. In all, sales have been up on a year-over-year basis for the past 25 months.

Going forward, the situation looks reasonably good. For example, the employment outlook, which may be a more critical component even than interest rates, is brightening; home prices are rising--up 13.7% in the past year--and housing inventories, at 5.1-month supply remains modest enough that prices and demand should stay high.

Overall, this was a very positive data issuance and one that is consistent with the better showing in housing starts and building permits seen recently. The next test for this market comes tomorrow, when the Commerce Department reports on sales of new homes for July.    

At the time of this article's writing, the author did not have positions in any of the companies mentioned.