USED-home sales drop 0.6 percent but remain near record levels; stocks rebound
Wednesday, July 25th 2001, 12:00 am
By: News On 6
WASHINGTON (AP) _ Sales of used homes dipped in June but still remained near record levels, further evidence of the housing market's resilience in the face of the sluggish economy.
After jumping by 2.7 percent in May, existing-home sales declined by 0.6 percent in June to a seasonally adjusted annual rate of 5.33 million. That was close to May's 5.36 million, which marked the third highest level on record, the National Association of Realtors reported Wednesday.
Stocks were rebounding. The Dow Jones industrial average was up 53 points and the Nasdaq index had gained 6 points around midday.
Used-home sales reached an all-time high of 5.45 million in June 1999, when the economy was booming.
June's performance was better than many economists were predicting. They had forecast a 1.5 percent drop in sales because of the weak labor market, volatile stock market and the fact that mortgage rates actually rose from May to June.
The average rate on a 30-year fixed-rate mortgage in June was 7.16 percent, up from 7.15 percent in May, but well below the 8.29 percent posted in June 2000.
``With mortgage interest rates projected to rise slightly to around 7.3 percent during the second half of the year, and some expected sluggishness in the general economy, month-to-month homes sales should trend down from these high marks,'' said David Lereah, the association's chief economist.
``However, we expect a total of 5.15 million existing-home sales in 2001, making this year, the second highest on record,'' he added.
The housing market has been one of the main pillars holding up the weakened economy.
In an effort to avert the first recession in the United States in 11 years, the Federal Reserve has slashed interest rates six times this year, totaling 2.75 percentage points.
Existing-home sales were down in all regions of the country except in the West.
In the Midwest, sales last month fell by 4.2 percent to a seasonally adjusted annual rate of 1.14 million; in the South, they were down by 2.3 percent to a rate of 2.11 million; and in the Northeast, sales declined by 1.6 percent to a rate of 630,000. But in the West, sales rose 6.6 percent to a rate of 1.46 million.
The drop in overall sales in June didn't hurt home prices.
The median existing-home sales price, meaning half sold for more and half for less, rose to a record $152,600 in June, up 8.8 percent from the median price for the same month a year ago. Home prices have remained strong throughout the economic slowdown.
``The higher home price in June partially reflects the trade-up buyers' preference for larger homes,'' Lereah said.