Housing Bubble
Existing home sales rise - break annual record
Sales of existing single-family homes rose strongly in December while 2002 easily set a new annual record, according to the National Association of Realtors®.
There were a total of 5,563,000 existing-home sales in 2002, up 5.0 percent from the previous record of 5,296,000 in 2001. NAR began tracking the sales series in 1968. Existing-home sales increased 5.2 percent in December to a seasonally adjusted annual rate* of 5.86 million units from an upwardly revised level of 5.57 million units in November.
Last month's sales activity was 12.7 percent higher than the 5.20-million unit level in December 2001 and was the third-strongest monthly sales pace on record.
David Lereah, NAR's chief economist, said a combination of favorable market conditions has been contributing to record housing activity. "Exceptionally low mortgage interest rates are the primary factor in record levels of home sales," he said. "Interest rates are the lowest they've ever been in Freddie Mac's records, and looking at other sources we have to go back to 1965 to see similar mortgage rates."
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was a record-low 6.05 percent in December, down from 6.09 percent in November; it was 7.07 percent in December 2001. The average 30-year rate for all of 2002 was 6.95 percent, the lowest annual average since Freddie Mac started tracking interest rates in 1971.
"Strong demand by first-time home buyers, fueled by the children of the baby boom generation and by immigration, along with a generally good job market and growing families trading-up to larger homes, also has been contributing to record home sales activity," Lereah said.
NAR President Cathy Whatley said the momentum of home sales is expected to remain strong. "With favorable affordability conditions and an improving economy, home sales are projected to remain strong in 2003 and should come fairly close to record levels, but it's unlikely they'll top last year's record-smashing performance," she said.
"Because the overall economy is expected to improve this year, mortgage interest rates should rise modestly," Whatley said. "For the near term, this means we have the most favorable housing affordability conditions that can be expected all year. The only problem is a localized shortage of homes available for sale in many of the markets that have had a tight supply over the last year."
Housing inventory levels fell 10.8 percent at the end of December with 2.06 million existing homes available for sale, which represents a 4.2-month supply at the current sales pace, down from a 5.0-month supply in November.
The national median existing-home price was $164,000 in December, up 7.1 percent from December 2001 when the median price was $153,100. The median is a typical market price where half of the homes sold for more and half sold for less.
For all of 2002, the median price was $158,300, up 7.1 percent from a median of $147,800 in 2001. This is the strongest annual increase since 1980 when the median price rose 11.7 percent.
Regionally, homes in the Midwest were reselling at an annual rate of 1.36 million units in December, up 12.4 percent from November; they also were 12.4 percent above December 2001. The median price in the Midwest was $137,300, up 4.6 percent from a year ago.
Existing-home sales in the South rose 4.6 percent in December to an annual rate of 2.29 million units, and were 11.7 percent higher than December 2001. The median price of an existing home in the South was $155,200, which was 6.7 percent higher than December 2001.
The home resale pace in the West rose 2.0 percent from November to an annual rate of 1.56 million units in December; the pace was 17.3 stronger than December 2001. The median existing-home price in the West was $215,200, up 11.3 percent from the same month a year earlier.
In the Northeast, existing-home sales rose 1.6 percent from November to a pace of 650,000 units in December, and were 6.6 percent higher than a year ago. The median existing-home price in the Northeast was $173,000, up 11.1 percent from December 2001.
*The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns.
Source: Source: The National Association of Realtors®
