January sales of existing homes hit record number nationwide

Associated Press

WASHINGTON — Americans snapped up a record number of previously owned homes in January, a fresh sign that the country may be pulling out of the recession.

Sales of existing homes rocketed to a seasonally adjusted annual rate of 6.04 million last month, representing a 16.2 percent jump from December’s level, the National Association of Realtors reported Monday.

"Some people who have held back from major commitments over the last few months have entered the housing market," said David Lereah, the association’s chief economist.

Economists were heartened by the report, saying it bodes well for continued spending by consumers — the lifeblood of the economy — in the coming months.

"This tells us something very fundamental about the consumer psyche: They are not shaken. They are willing to commit and they will be there to support a recovery," said Ken Mayland, founder of ClearView Economics.

"All those homes will be needing some new furnishings and appliances to spruce them up," he added. "Consumer spending should do well through the spring."

On Wall Street, the housing report, along with an upbeat outlook from General Motors and a ratings upgrade of Sun Microsystems, propelled stock prices sharply higher. The Dow Jones industrial average gained 177.56 points to close at 10,145.71.

The continued strength of consumer spending, which accounts for two-thirds of all economic activity in the United States, has helped keep the economy from sinking deeper into recession.

"The reality is that households are confident and there is little doubt that they will lead the economic recovery," said Joel Naroff of Naroff Economic Advisors.

Treasury Secretary Paul O’Neill, appearing on CNBC, said he believes the economy is rebounding and he is bullish about its prospects going forward.

In addition to improved consumer confidence, economists cited other factors motivating home buyers: low mortgage rates; mild house-hunting weather; and solid appreciation in housing values, which makes buying a home a good investment, especially when the stock market is unstable.

The seasonally adjusted annual rate of homes sold in January surpassed the previous record of 5.49 million set in August. The 16.2 percent record jump in sales exceeded the previous all-time monthly gain, set in May 1995.

By region, sales of existing homes in the West surged last month by 23.3 percent to a rate of 1.64 million. In the Northeast, sales jumped 16.4 percent to a rate of 710,000, and in the South, they rose by 16.1 percent to a rate of 2.38 million. In the Midwest, sales were up 8.3 percent to a rate of 1.31 million.

The rise in existing-home sales lifted home prices. The median sales price — meaning half sold for more and half for less — was $151,100 in January, a 10.2 percent increase from the same month a year ago.

Although existing-home sales dipped by 1 percent in December, sales set a record of 5.3 million for all of 2001, according to revised figures released Monday.

The housing market has managed to remain solid throughout the economic slump, in large part because of low mortgage rates.

Rates on 30-year mortgages hit a low of 6.45 percent in early November, the lowest point since Freddie Mac began conducting its nationwide survey in 1971.

While rates have moved higher since, analysts say that rates this year will be fairly stable, remaining close to the record lows set last year and continuing to support the housing market.