Sales of existing homes set record in January, up 16.2 percent from December

WASHINGTON (AP) _ Motivated by low mortgage rates and increasing confidence in the economy, Americans drove up sales of previously owned homes to a monthly record in January. <br><br>The National Association

Monday, February 25th 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ Motivated by low mortgage rates and increasing confidence in the economy, Americans drove up sales of previously owned homes to a monthly record in January.

The National Association of Realtors reported Monday that existing homes sold last month at a seasonally adjusted annual rate of 6.04 million, a whopping 16.2 percent increase over the previous month.

The level of homes sold surpassed the previous monthly record rate of 5.49 million set in August 2001. The 16.2 percent record jump in sales exceeded the previous all-time monthly gain in May 1995.

The strong housing report comes even as the rest of the national economy is trying to pull out of a recession that began in March.

Analysts cited these factors: low mortgage rates; mild house-hunting weather; and solid appreciation in housing values, which makes buying a home a good investment especially when the stock market is unstable.

Consumer confidence _ which was shaken by the Sept. 11 terror attacks _ also has improved, another factor in people feeling more inclined to make a big-ticket purchase.

``We've had favorable housing affordability conditions for some time, but what's new is the effect of a gradual increase in consumer confidence combined with a turnaround in the economy,'' said David Lereah, chief economist for the real estate group.

The housing market has managed to remain solid throughout the economic slump, in large part because of low mortgage rates.

Rates on 30-year mortgages hit a low of 6.45 percent in early November, the lowest point since Freddie Mac began conducting its nationwide survey in 1971.

While rates have moved higher since that time, analysts say that rates this year will be fairly stable, remaining close to the record lows set last year and will continue to support the housing market.

In January, the average rate on a 30-year fixed-rate mortgage was 7 percent, down from 7.07 percent in December and lower than 7.03 percent in January a year ago.

Although existing-home sales dipped by 1 percent in December, sales set a record of 5.25 million for all of 2001, prompting economists to marvel at the industry's resilience even as the national economy was mired in recession.

For Americans who opted to buy a home last year, the benefit of low mortgage rates outweighed other negative factors, including a weak labor market.

By region, sales of existing homes surged 23.3 percent in the West to a rate of 1.64 million. In the Northeast, sales jumped 16.4 percent to a rate of 710,000 and in the South, they rose by 16.1 percent to a rate of 2.38 million. In the Midwest, sales were up 8.3 percent to a rate of 1.31 million.

The rise in existing-home sales lifted home prices. The median sales prices _ meaning half sold for more and half for less_ was $151,100 in January, a 10.2 percent increase from the same month a year ago.

The Federal Reserve slashed short-term interest rates 11 times last years in an effort to revive the economy. The Fed, citing signs of a recovery, opted last month to keep interest rates unchanged. Many economists believe the Fed's aggressive credit easing will pave the way for a rebound in the second half of this year.

If the rebound turns out to be a lot stronger than many are anticipating, the Fed could begin raising interest rates later this year, a move that indirectly might prompt long-term mortgage rates to rise. Still, most economists are expecting mortgage rates to hover in the 7 percent range for most of this year.