Existing home sales strong in spite of slip in January

Sales of existing homes in 2000 are expected to make it the 3rd best year ever

Existing single-family home sales declined in January from the previous month's high pace, but remained at what is considered a strong level, according to a release from the National Association of Realtors.

The seasonally adjusted annual rate of existing single-family home sales was 4.59 million units in January, down 10.7 percent from the exceptional rate of 5.14 million units reported in December. The January pace was 10 percent below the pace of 5.1 million units recorded in January 1999.

NAR President Dennis R. Cronk attributed part of the decline in activity to recent increases in mortgage interest rates. "Higher rates have caused the market to settle to a less hectic pace," Cronk said. Despite the slip, he said, the housing industry remains robust.

"Consumer confidence is still strong," he added.

The national median existing-home price for January was $132,200, an increase of 1.5 percent from January 1999 when the price was $130,300. The median is the midpoint half the homes sell for less, while half sell for more.

Freddie Mac reported that the national average commitment rate for a 30-year, conventional fixed-rate mortgage was 8.21 percent in January, compared to 7.91 percent in December and 6.79 percent in January 1998.

"Although rates are moving up, they are just one part of the affordability equation. Overall, affordability remains healthy," Cronk said.

NAR Chief Economist James Smith pointed out that while expectations have been for the housing market to slow down in the months ahead, the association is predicting sales of existing single-family homes to remain above the 4.5 million mark.

"We expect a gradual downward turn through the year as economic growth slows, but we're still looking for very strong numbers," he said. "To place this volume in perspective, we still expect 2000 to be the third best year ever for existing-home sales."

"Even if the rate of economic growth slows in 2000, as nearly all analysts predict, overall activity for both residential and commercial real estate can be expected to remain just slightly below the record levels of 1999," Smith added.

"The real problem is supply," he said. "There simply aren't enough homes for sale in many parts of the United States." At the end of January, there were 1.15 million existing homes available for sale nationwide, which represents only a three-month supply at January's sales pace.

This figure sets a record low for national inventory; the supply of homes dropped more than 23 percent from December 1999 and fell nearly 44 percent from one year ago, according to NAR.