• David Gill

Starts, resales steady home market

WASHINGTON -With so many other major economic indicators heading south for the winter (and beyond, perhaps), the housing market is showing signs of stability.

All three major pieces of the housing scenario achieved healthy levels in November. Both existing home sales and housing starts gained from their levels in October. Resales picked up 4.4 percent from October to November, to 5,220,000 units on a seasonally adjusted annualized basis, according to the National Association of Realtors (NAR); and starts gained 6.4 percent, finishing November at 1,562,000 units on the same basis, said the U.S. Department of Commerce.

On the down side, the Commerce Department said new home sales took a 2.2 percent dive between October and November, but kept above the 900,000-unit level-posting 909,000 units on a seasonally adjusted annualized basis.

All of the housing-industry pundits cite reduced mortgage rates as a prime cause for the housing market bucking the trend set by the economy as a whole. As reported by the Federal Home Loan Mortgage Association (Freddie Mac), the average interest rate for a 30-year, fixed-rate home mortgage in November was 7.75 percent; earlier in 2000, the rate was above 8 percent.

"Mortgage interest rates have dropped three-quarters of a percentage point since peaking in May, which is keeping sales strong in the closing months of the year," said NAR chief economist David Lereah.

Michael Niemira, vp and economist with Bank of Tokyo-Mitsubishi Ltd., thought that the same dynamic was helping to keep new home sales at "respectable" levels. Niemira also observed that the median price for a new home in November was softening as well, off 0.1 percent from September and 1.7 percent from November 1999.

Mark Vitner, vp and economist for First Union Economics Group, said, "The recent decline in mortgage rates appears to have brought quite a few first-time home buyers back into the market." Vitner also noted that average sale prices also fell in November, which "suggests that a large part of November's pickup was in lower-priced homes."

The beef for the increase in starts came largely from the multifamily sector, which increased in starts by almost 13 percent in November. Robert Mitchell, president of the National Association of Home Builders (NAHB), cautioned about "signs of erosion" in the single-family sector, which he tied to the stock market's roller coaster and softening in consumer confidence.

Mitchell noted that, in recent NAHB surveys, "concerns have increased in recent weeks regarding conditions for single-family home sales." He observed that, along with a small slip in single-family starts in November, permits for new single-family homes also declined during that month.

David Orr, an economist with First Union, said single-family starts (the largest of the two components to the whole starts picture) are probably headed for a lag in the next few months. "The slower pace of job growth and the lack of new stock market wealth will contain starts in 2001," Orr said.

Looking at the sales picture, Orr observed that inventories for unsold homes were at relatively lean levels. "But low inventories are probably a good thing, particularly with the economy slowing," he said. In other words, builders don't have to worry about scaling back production or selling off inventories to prepare for an economic slowdown.

Housing by region/Month-to-month percent change

Existing Home Sales Housing Starts New Home Sales

















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