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Housing sales up slightly in October

October's key housing industry indicators presented the picture of a resilience that other industries envy. Both sales numbers, existing homes and new homes, increased over their September levels (although the new-homes rise was slight). Housing starts declined, but minimally.

October resales measured slightly less than 5,170,000 units on a seasonally adjusted, annualized basis, a 5.5 percent hike over the September figure, according to the National Association of Realtors (NAR). New home sales for that month totaled 880,000 units on the same basis, up 0.2 percent. Starts slipped 1.3 percent from September to October, to 1,552,000 units on the same basis. The starts and new homes numbers are courtesy of the U.S. Department of Commerce.

While not exactly portraying an industry full of good health, they do present an optimistic picture for housing, and perhaps the economy as a whole, going into next year. A large percentage of consumer purchases revolve around home sales, making these indicators among the most closely followed of all U.S. economic numbers each month.

NAR president Martin Edwards Jr. said the October resale figure could indicate a 5 million-plus units year for resales in 2001. If so, it could bring the number to its second-highest level in history (the record was set in 1999, at 5,205,000 units). Edwards also believes the momentum could carry resales into the new year: "Going forward we're looking for an upturn in the spring, with total sales in 2002 essentially matching this year's strong performance."

The association's chief economist, David Lereah, attributed the boost to low mortgage interest rates, which averaged 6.62 percent for a 30-year, fixed-rate mortgage in October, according to Freddie Mac. "While we have some way to go before we reach record activity again, this demonstrates the strong demand and favorable affordability conditions that exist in today's housing market," Lereah said.

The decline in starts did not dampen the spirits of the National Association of Home Builders. Bruce Smith, NAHB's president, considered the starts figure "reassuring, and [they] indicate that the net effects of the attacks on America in September are not nearly so bad as they might have been." Smith also noted that the association's housing market index for November increased two points, to 49, showing the optimism builders now feel about the market.

The analyst community was also impressed by housing's October strength. Mitchell Held, managing director of U.S. equity research for SalomonSmithBarney, said the October starts figure "was slightly better than expected. Indeed, housing starts appear to be running close to a 1.6 million rate for the year, which would be an improvement over 2000."

To Dick Rippe, managing director of Prudential Financial's market commentary section, "the bottom line is that housing is down a little bit, but holding up pretty well. If consumer sentiment sort of flattens out and employment doesn't go down too much more, the very favorable financials for housing — the very low mortgage rates and affordability — will hold the sector together pretty well and probably let it go back up some, a few months down the road."

Robert Podorefsky, economic analyst with Fleetmarkets, found the same strength from reading the resales figure. "The [NAR's] report beat what the market thought would happen, and suggests that post Sept. 11, housing momentum has not been materially altered. That in and of itself is a reason for celebration."

Housing by region
Month-to-month percent change

Existing home sales Housing starts New home sales
Northeast 10.2 5.3 15.8
Midwest 7.3 14.3 -11.7
South 6.2 0.0 1.4
West 1.6 -16.7 3.3


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