Home sales decline slightly in February
Monday, March 26th 2001, 12:00 am
By: News On 6
WASHINGTON (AP) _ Sales of new and existing homes both dipped slightly in February, but demand remained strong as housing continued to demonstrate few adverse effects from the slowdown in the overall economy.
Sales of new single-family homes fell by 2.4 percent last month after a steeper 5.4 percent decline in January, the Commerce Department reported Monday.
Even with the back-to-back declines, sales of new homes remained at a healthy annual rate of 911,000 units in February.
Likewise, sales of existing homes were down slightly in February, a dip of 0.4 percent, following an increase of 5.3 percent in January. The small February decline left sales at a strong annual pace of 5.18 million homes.
``In the midst of all the economic mess, housing is putting in a remarkable performance,'' said David Seiders, chief economist at the National Association of Home Builders.
Analysts attributed the continued strength to declining mortgage rates.
David Lereah, chief economist for the National Association of Realtors, which compiled the existing-home-sales report, said the drop in 30-year fixed rate mortgages since a peak in May 2000 means that an additional 300,000 households can now qualify to buy a typical home.
``Although the slowing economy is causing a little drag on the market, consumers who are confident about their own future are going ahead with big-ticket purchases like homes and cars,'' Lereah said.
According to a nationwide weekly survey of rates, 30-year fixed rate mortgages dropped to 6.89 percent last week, significantly below the peak of 8.64 percent hit in May.
In that month, the Federal Reserve pushed up short-term interest rates for a sixth time in an effort to slow an economy that at the time was growing at a sizzling pace.
However, with economic growth slowing dramatically at the end of last year, the Fed switched course. The Fed has now cut interest rates three times since Jan. 3, reducing them at the fastest pace in 16 years.
Despite the quick turnaround, a number of critics contend the Fed waited too long to cut rates, pushing the risks of an outright recession up significantly.
The National Association of Business Economists said Monday that 34 percent of a panel of 267 of its members believed that the Fed had been too restrictive with monetary policy, the highest reading since February 1996.
Economists are looking for the Fed to ease rates further in coming months, helping to keep mortgage rates low and the economy out of a recession.
Seiders forecast that sales of new homes this year should total 875,000, a solid performance but a drop from recent highs of 907,000 in 1999 and 903,000 last year.
But he said that forecast could be off the mark if the stock market continues to plunge and consumers suddenly decide to stop spending.
``If the stock market goes into another tailspin and confidence levels continue to erode, then almost no mortgage rate is likely to keep people in the market,'' Seiders said.
The 5.4 percent drop in new-home sales in February reflected weakness in the Midwest and West.
In the Midwest, sales fell 18.9 percent, the biggest decline since April 2000, to an annual rate of 137,000 units. Sales in the West were off 1.5 percent to an annual rate of 263,000 annual units.
Sales in the South, which account for nearly half of total new-home activity, edged up a slight 0.5 percent last month to an annual rate of 440,000 homes.
Sales in the Northeast soared by 20.3 percent, the biggest gain since last October, to a seasonally adjusted annual rate of 71,000 homes.
The median price for a new home, the point where half the homes sold for more and half for less, was $210,900 in February, up 3.2 percent from January's median price of $204,400.
The average price of a new home was up a slight 0.1 percent to $167,000 in February.
The median price of an existing home was up 1.2 percent in February to $138,800, while the average price for an existing home dipped 0.6 percent to $174,700, according to the Realtors' report.
The small decline in sales of existing homes reflected weakness in the Northeast, where sales dropped 3 percent to an annual rate of 640,000, and the South, where sales dropped 2.8 percent to an annual rate of 2.05 million.
Sales of existing homes actually rose 3.1 percent in the West to an annual rate of 1.33 million units and were up 1.8 percent in the Midwest to an annual rate of 1.16 million.