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Home sales continue to build

Undeterred by war fears, a persistently weak jobs outlook and increasingly credit-poor consumers, the broad U.S. housing market closed out the year on a remarkably resilient note, with all sectors climbing substantially higher during December.

Sales of existing homes, by far the largest slice of the housing pie, rebounded from weakness the month before and climbed by 5.2 percent, to a seasonally adjusted level of 5.9 million units. And measured against a year ago, sales shot up by 12.7 percent from a level of 5.2 million units, the National Association of Realtors (NAR) reported.

David Lereah, NAR chief economist, said, " Exceptionally low mortgage interest rates are the primary factor in record levels of home sales." According to Freddie Mac, the national average commitment rate for a 30-year convention, fixed-rate mortgage was a record low 6.05 percent in December.

Home sales are expected to remain strong in 2003, if not at last year's record-high levels, said NAR president Cathy Whatley. "With favorable affordability conditions and an improving economy, home sales are expected 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."

Building on a November's gain of almost 4 percent, sales of new homes rose by another 3.5 percent in December, to a seasonally adjusted 1.1 million units. Measured on a year-over-year basis, new home sales advanced by 10.5 percent.

And home builders are betting that the bubble is nowhere near bursting, continuing to break ground for new homes. In a measure of rock-solid builder confidence, housing starts jumped up by 5.0 percent over November levels, to a seasonally adjusted 1.8 million units. Remarkably, starts rocketed up by 15.9 percent over the December 2002 reading.

Scoping out results on a regional basis, the picture was brightest in the Midwest, where new home sales charged ahead by 28.3 percent; existing home sales rose by 12.4 percent; and starts perked up by 4.0 percent. Sales of existing homes and housing starts rose in all regions of the country, but new home sales were spotty. Acting as a ballast to the big gain in the Midwest , new home sales fell by 12.7 percent in the Northeast and by 7.5 percent in the West and ran flat in the South.

Housing by region
Month-to-month % change

Existing home sales Housing starts New home sales
Source: U.S. Department of Commerce and the National Association of Realtors.
Northeast +1.6% +18.2% -12.7%
Midwest +12.4 +4.0 +28.3
South +4.6 +0.6 0.0
West +2.0 +9.8 -7.5

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