Existing-Home Sales Jump in August
Monday, September 25th 2000, 12:00 am
By: News On 6
WASHINGTON (AP) â€” Cheaper borrowing costs encouraged Americans to snap up existing homes in August, giving sales their biggest boost in 14 months. But economists said the rebound won't deter the Federal Reserve from leaving interest rates unchanged at its meeting next week.
The National Association of Realtors reported Monday that sales of previously occupied homes shot up by a surprising 9.3 percent last month to a seasonally adjusted annual rate of 5.27 million.
``Mortgage rates came down, which make houses more affordable, plus August is a big home-buying month. People try to get settled before school starts,'' said Stuart Hoffman, chief economist, PNC Financial Services Group.
In August, the average interest rate on a fixed-rate 30-year mortgage was 8.03 percent, down from 8.15 percent in July. But that was higher than the 7.94 percent rate in August 1999. Since August, 30-year rates have edged down. They stood at 7.90 percent last week.
The Federal Reserve has boosted interest rates six times over the last 15 months to slow the economy and keep inflation under control. A spate of other economic reports shows the Fed's rate increases are working to moderate economic growth and that has helped to ease mortgage rates in recent months.
Against this backdrop, analysts predicted the central bank will leave interest rates alone not only on Oct. 3 but also for the rest of this year.
On Wall Street, stocks fell as investors, growing even more nervous with the advent of third-quarter earnings reports, again unloaded technology stocks. The Dow Jones industrial average lost 39.22 points to close at 10,808.15.
August's big increase in existing-home sales came after sales plummeted 9.2 percent in July.
Economists blamed that decline on a spike in the average rate of 30-year mortgages, which hit a five-year high of 8.64 percent in mid May. Analysts said it often takes a month or so for a rate increase to affect sales.
Many analysts had expected sales to increase by around 4.4 percent in August. The 9.3 percent gain was the largest since a 10.9 percent jump in June 1999.
Americans are in a buying mood because of plentiful jobs, rising incomes, tame inflation and stock market gains, said Richard Yamarone, economist with Argus Research Corp. Lots of available financing options also help, he added.
``Some of the boost in this month's report comes from people selling their existing homes to trade up to larger existing homes as well as newly built houses,'' said David Lereah, the National Association of Realtors' chief economist.
By region, the West posted the biggest gain with sales rising 16.3 percent to a seasonally adjusted annual rate of 1.43 million in August.
In the Midwest, sales rose 10.6 percent to a rate of 1.15 million units. They grew by 5.8 percent in the South to a rate of 2.01 million, and sales went up by 4.6 percent in the Northeast to a rate of 680,000.
The boost in sales also lifted home prices.
The median existing-home sales price, meaning half sold for more and half for less, was $142,200 in August, up 3.5 percent from the median price for the same month a year ago.
Housing activity â€” an engine of the robust economy â€” is expected to moderate this year but still be at healthy levels.
``Housing is bouncing back and the biggest reason is the decline in mortgage rates,'' said economist Joel Naroff of Naroff Economic Advisors. ``With mortgage rates at or below 8 percent, households are back shopping.''
On the Net: Existing-home sales report: http://nar.realtor.com/