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Home buys surge as starts falter

Still riding the crest of low financing costs, U.S. consumers continued to buy homes at a record-breaking pace during August, with sales of new and existing homes both climbing sharply higher.

Sales of existing homes, by far the biggest slice of the housing pie, jumped up by 5.1 percent, building on a gain of 5.1 percent recorded during July, the National Association of Realtors reported. Fueled by low interest rates, and a sense that mortgage rates can only start climbing higher, sales of existing homes have shot up by 21.8 percent over the past 12 months, to a seasonally adjusted rate of 6.47 million units from 5.3 million units during August of 2002.

Ditto the highly volatile market for more expensive new homes, where sales can swing widely from month to month, according to a Commerce Department report. There, sales raced ahead at a double-digit pace, climbing by 10.7 percent and recovering from a 5.7 percent decline the month before.

The only marker pointing south in August was housing starts, which declined by 3.8 percent, giving up all and more of July's 2.6 percent increase, which took starts to their highest level in 17 years. But even with the August dip, starts have climbed by almost 12 percent since August of last year, the Commerce Department reported. And underlining home builder confidence, the number of building permits issued in August jumped up by 4.8 percent to its highest level this year. But the good news from home builders didn't go very far, and starts fell in all regions of the country but the Midwest, where they inched up just 1.0 percent. Hard hit by wet weather, the National Association of Home Builders reported, starts in the Northeast tumbled by 23.2 percent "from an exceptionally fast construction pace in that region during the previous month." The South and West posted more moderate declines of 2.7 and 1.8 percent, respectively.

"The performance of residential building starts and permits through the last two months virtually guarantees another strong contribution from housing to GDP growth for the third quarter, said David Seiders, chief economist of the National Association of Home Builders. "One very positive recent development has been the downward movement of long-term mortgage rates from their highs in early September."

Housing by region
Month-to-month % change

Existing home sales Housing starts New home sales
Source: U.S. Department of Commerce and National Association of Realtors.
Northeast 1.4 -23.3 12.5
Midwest 3.0 1.0 12.9
South 6.5 -2.7 -1.1
West 8.0 -1.8 2.4

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