Housing sales bounce back in July

Don Hogsett, September 2, 2002

NEW YORK — Spurred on by alluringly low interest rates, the broad American housing market remained unexpectedly resilient during July, with sales of both new and existing homes climbing substantially higher despite persistent weakness in the U.S. economy and consumer sentiment and spending.

Staging a strong recovery from a big dip in June, sales of existing homes, by far the largest segment of the housing market, increased by 4.5 percent, to a seasonally adjusted level of 5.33 million units, the National Association of Realtors (NAR) said.

The smaller market for generally pricier new homes shot up as well, surging by 6.7 percent, the National Association of Home Builders reported, to a seasonally adjusted level of 1.02 million from the June rate, which was revised downward to 953,000 from an originally reported level of slightly more than one million units.

The only segment to record a decline was the forward-looking segment, housing starts, which slipped by 2.7 percent, the Commerce Department said, to a seasonally adjusted 1.65 million units from the 1.70 million level reached in June units.

David Lereah, NAR chief economist, credited historically low interest rates with supporting the housing market at higher-than-expected levels during July. Interest rates, he said, are "the lowest since Freddie Mac started tracking them in 1971. And looking at other sources we have to go back to 1967 to see interest rates as low as they are today."

Given the persistently low interest rates, Lereah forecast that for all of 2002 sales of existing homes will climb by 2.7 percent from last year's record, to 5.44 million units. "Home sales should hold to a slower but more even course in the second half of the year," commented NAR president Martin Edwards Jr.

Reflecting the unusually strong market, housing prices continued to climb during July, with the national median price of an existing home climbing by 7.3 percent, to $162,800. At the same time, housing inventory levels by the end of July had dropped by 9.3 percent from June to a total of 2.05 million existing homes available for sale, a 4.6-month supply at the current sales pace. "The number of homes on the market remains lean, which is supporting strong price gains," said NAR economist Lereah.

Housing by region
Month-to-month % change

Existing home sales Housing starts New home sales
Northeast +4.9 -11.7 -9.1
Midwest +10.2 -25.9 +16.0
South +6.4 5.8 +10.1
West -2.9 -3.4 -0.4

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