Existing-home sales dip in February but still are second-highest monthly level ever

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Posted 11:43AM on Monday, March 25, 2002

WASHINGTON - Sales of previously owned homes dipped in February but still racked up the second highest monthly level on record as low mortgage rates and good weather motivated buyers. After hitting a record high in January, sales of existing homes edged down 2.8 percent last month to a seasonally adjusted annual rate of 5.88 million, the National Association of Realtors reported Monday. Even with the drop, sales in February were quite brisk and were the second highest ever recorded in one month since the association began keeping records in 1968. Low mortgages rates, mild weather, solid appreciation in home values and generally good consumer attitudes about the economy all helped to keep home sales at solid levels, economists said. "Obviously, low mortgage rates are the key to a strong housing market, but rising consumer confidence and a growing number of households bode well for the future," said National Association of Realtors President Martin Edwards Jr. On Wall Street, stocks moved lower. The Dow Jones industrial average was off 36 points and the Nasdaq index lost 17 in morning trading. In February, the average rate on a 30-year fixed-rate mortgage was 6.89 percent, down from 7 percent in January, according to Freddie Mac, the mortgage company. But mortgages rates, as tracked by Freddie Mac, have climbed the last three weeks as the country bounces back from recession. The average rate on a 30-year mortgage rose to 7.14 percent last week. Mortgage rates are rising as investors raise their bets that the Federal Reserve may boost short-term interest rates in May or June. The Fed cut rates 11 times last year to revive the economy, which fell into a recession last March. Many economists are predicting 30-year rates will reach a high of 7.5 percent by the end of this year. That would make buying a home impossible for some, but it would still be affordable for many, analysts said. "As the economy gains momentum, along with an expected rise in mortgage interest rates, home sales may come down to more sustainable levels, but we expect this year's total sales to be very close to last year's record," said David Lereah, chief economist for the National Association of Realtors. Low mortgage rates pushed both home sales and mortgage refinancing activity to new highs last year. In January, existing-home sales rose to a record 6.05 million, according to revised figures. That's slightly better than previously reported. By region, sales went up 1.4 percent in the Northeast to a seasonally adjusted annual rate of 720,000 in February, a new monthly record. In the Midwest, sales dropped 0.8 percent to a rate of 1.30 million. Sales fell by 3.7 percent in the West to a rate of 1.58 million and in the South they declined 4.2 percent to a rate of 2.29 million. Home prices are being pressured by lean inventories of available houses, economists said. The median sales price -- meaning half sold for more and half for less-- was $151,000 In February, a 8.2 percent increase from the same month a year ago. ---- On the Net: National Association of Realtors: http://nar.realtor.com/