Sales of previously owned homes dip in May, but still strong

WASHINGTON (AP) _ Sales of previously owned homes dipped in May but still racked up the fourth-highest monthly level on record as low mortgage rates motivated buyers. <br><br>The National Association of

Tuesday, June 25th 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ Sales of previously owned homes dipped in May but still racked up the fourth-highest monthly level on record as low mortgage rates motivated buyers.

The National Association of Realtors reported Tuesday that sales of existing homes edged down 0.3 percent to a seasonally adjusted annual rate of 5.75 million.

Even with the drop, sales in May were quite brisk and were the fourth highest even recorded in one month since the association began keeping records in 1968.

When the country was suffering through a recession last year, the housing market was one of the economy's few bright spots and activity has continued to remain solid, thanks in large part to low mortgage rates. Solid housing appreciation also has been a factor attracting buyers, especially given the weak stock market, economists said.

``Housing is continuing to be a significant factor in sustaining the U.S. economy,'' said the association's chief economist David Lereah. ``Going forward, the trend should be a gradual decline in home sales activity but they'll stay above last year's record,'' he said.

For all of 2001, a record 5.3 million existing homes were sold. The association expects sales figures this year to top that.

In May, the average rate on a 30-year fixed-rate mortgage was 6.81 percent, down from 6.99 percent in April and well below the 7.15 percent rate in May 2001, the association said, citing figures compiled by Freddie Mac, the mortgage company.

Last week, rates on 30-year mortgages fell to 6.63 percent, the lowest in five months, Freddie Mac said.

Given the lackluster economic recovery and expectations that the Federal Reserve will keep short-term interest rates at 40-year lows through the summer, Lereah said there's a chance that the 30-year mortgage could stay below 7 percent for most, if not all, year.

Earlier this year, many economists were predicting that 30-year rates could rise to 7.5 percent by the end of the year, but that was based on the expectation that the recovery would be more robust than it now is.

``The sluggish pace of the overall economic recovery will keep interest rates from rising anytime soon,'' said NAR President Martin Edwards Jr..

By region, sales in May declined 3.9 percent in the South to a seasonally adjusted annual rate of 2.20 million. In the Northeast, sales dropped 2.9 percent to a pace of 680,000. But in the West, sales rose 4.5 percent to a rate of 1.62 million, and in the Midwest, they increased to a rate of 1.25 million, a 1.6 percent advance.

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 $154,600 in May, a 6.6 percent increase from the same month a year ago.

In April, existing-home sales rose 6.7 percent to a rate of 5.77 million, according to revised figures, just slightly less brisk than the 7 percent increase previously reported.

In another report, the number of Americans past due on their credit card bills held steady in the first quarter of this year, the American Bankers Association reported.

The seasonally adjusted percentage of credit card accounts 30 or more days past due in the January-March quarter was 3.88 percent, unchanged from the previous quarter.

``The fact that delinquencies have either held steady or improved reflects the underlying strength of consumer finances,'' said ABA's chief economist James Chessen.

The delinquency rate on a composite of other types of consumer loans _ including auto loans, personal loans and home equity loans _ declined from 2.34 percent in the fourth quarter to 2.10 percent in the first quarter of this year, the lowest level since the second quarter of 1999, the ABA said.