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Mixed signals from housing market

The broad housing market, a driver of the U.S. economy over the past two years, continued to send out mixed signals as 2003 drew to a close. Sales of existing homes and housing starts both climbed higher in December, while sales of new homes slacked off for a fourth straight month.

Sales of existing homes — by far the largest sector of the market — surged ahead during December, rebounding from a November drop and climbing by 6.9 percent to a seasonally adjusted annual rate of 6.47 million units, a record for sales.

"The biggest factor is a resumed decline in mortgage interest rates, which have been lower than most analysts expected," said David Lereah, chief economist of the National Association of Realtors.

The big December bump-up came as a surprise, Lereah acknowledged. "We've been expecting the pace of home sales to ease, and a decline in November seemed to indicate a more sustainable pace, but the rebound in December — the second highest monthly pace on record — shows there's still a lot of life in this market."

Housing starts recorded an unexpected gain in December as home builders continued to bet the housing bubble is nowhere near bursting.

The U.S. Commerce Department reported that housing starts ticked up by 1.7 percent in December to a seasonally adjusted annual rate of 2.09 million. At the same time, November starts were revised modestly lower, to a 2.05 million annual rate, from an earlier reported pace of 2.07 million units.

Sending out a further signal that builder sentiments remain buoyant, building permits — a key barometer of future construction plans — rose in lock step with starts, advancing by 3.3 percent, to an annual rate of 1.9 million units.

The December gain in housing starts was fueled by a big increase in multi-family dwellings, apartments and condos, up by 15.7 percent. The market for single-family homes actually dipped slightly, by 0.6 percent.

The sour note was struck in the highly volatile market for costly new homes, where sales fell for a fourth straight month, declining by 5.1 percent to a seasonally adjusted annual rate of 1.06 million units, the Commerce Department reported.

Housing by region
Month-to-month % change

Existing home sales Housing starts New home sales
Northeast 2.9% -6.7% 12.2%
Midwest 9.4 -4.3 8.7
South 5.3 7.1 -8.1
West 7.9 0.2 -11.2
Source: U.S. Department of Commerce and the National Association of realtors

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