Housing market stays hot

Associated Press

WASHINGTON — Even though Americans bought fewer previously occupied homes in June, sales were at near record levels, suggesting that this main pillar of the economy remains sturdy.

The National Association of Realtors reported Wednesday that sales of existing homes dipped by 0.6 percent in June to a seasonally adjusted annual rate of 5.33 million, matching the fifth-highest level on record.

"This is the housing boom that just won’t go away," said economist Ken Mayland of ClearView Economics. "Housing is providing a firm foundation for sustaining the surprisingly robust trend of consumer buying, and the tax rebate checks, some of which are now in taxpayers’ hands, are the icing on the cake."

On Wall Street, stocks rebounded. The Dow Jones industrial average closed up 164.55 points at 10,405.67, recovering nearly half the 335 points it lost earlier this week.

Economists said consumer spending, which accounts for two-thirds of all economic activity, and the housing market have held up well during the yearlong economic slowdown and have been forces preventing the economy from tipping into recession.

"No matter what is happening around them, households remain so confident that they are still buying homes at a near-record pace," said Joel Naroff, president of Naroff Economic Advisors.

June’s existing-home sales performance was better than many economists were predicting. They had forecast a 1.5 percent drop in sales because of the weak labor market, volatile stock market and the fact that mortgage rates rose slightly from May to June.

The average rate on a 30-year fixed-rate mortgage in June was 7.16 percent, up from 7.15 percent in May, but well below the 8.29 percent posted in June 2000.

"With mortgage interest rates projected to rise slightly to around 7.3 percent during the second half of the year, and some expected sluggishness in the general economy, month-to-month homes sales should trend down from these high marks," said David Lereah, the association’s chief economist.

"However, we expect a total of 5.15 million existing-home sales in 2001, making this year the second highest on record," he added.

In May, sales jumped by 2.7 percent to a rate of 5.36 million, the third highest level on record. Even with the decline, June’s rate of 5.33 million was close to that mark.

Used-home sales reached an all-time high of 5.45 million in June 1999, when the economy was booming.

In an effort to avert the first recession in the United States in 11 years, the Federal Reserve has slashed interest rates six times this year, totaling 2.75 percentage points.

Fed chairman Alan Greenspan told Congress on Tuesday that the economy remains weak and another interest rate cut may be needed if the situation doesn’t improve.

Economists are predicting the Fed will cut rates by a quarter-point at its next meeting on Aug. 21.