Existing home sales rise after decline in January

Sales of existing single-family homes rose modestly in February following a sharp decline in January, indicating the market is beginning to stabilize, according to the National Association of Realtors.

Existing-home sales increased 6.7 percent in February to a seasonally adjusted annual rate of 4.75 million units from a 4.45-million unit pace in January. Last month's resale pace was 7.6 percent below the 5.14-million unit rate recorded in February 1999.

The modest rebound underscores the underlying strength of the housing market, according to NAR President Dennis R. Cronk.

"The fact sales improved in the face of continuing increases in mortgage interest rates demonstrates the very high demand for housing in the United States, and how important homeownership is in achieving the American Dream," he said in an NAR release. "We expect the market to be relatively stable over the next few months with more buyers switching to adjustable-rate mortgages in order to qualify for loans," he added.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 8.33 percent in February, up from 8.21 percent in January; it was 6.81 percent in February 1999. Although rates have risen, they remain affordable, Cronk said.

Fred Flick, NAR vice president of economic research, said the improvement in February resales coincides with a slight rise in housing inventory.

"Just as we're entering the spring home-buying season, more sellers are starting to place their homes on the market. This may help to ease the very tight inventory situation we see in many markets around the country," he said.

At the end of February there were 1.09 million existing homes available for sale, which represents a 2.8-month supply at the current sales pace, up 7.7 percent from a record low 2.6-month supply of housing inventory reported in January.

However, the current supply is 39.1 percent below February 1999, when there was a 4.6-month supply of homes on the market.

The association is forecasting a general slowdown for the housing market this year, primarily the result of gradually rising interest rates, Flick said.

NAR is projecting existing-home sales to total 4.74 million units in 2000, the third highest total on record, but a drop of 8.7 percent from the record high of 5.20 million sales recorded in 1999.

The association expects the 30-year fixed mortgage rate to average 8.5 percent during the second half of the year.

The national median existing-home price was $131,100 in February, up 2.3 percent from the same month a year ago, when the median price was $128,100. The median is the midpoint half the homes sell for less, while half sell for more.

"A lack of upper-end housing inventory is continuing to affect the national median price because more sales are taking place in the lower price ranges," Flick said.