Sales of existing homes in June increase to highest rate in last 2 1/2 years

July 28, 1991

WASHINGTON -- The market for previously owned homes remained strong in June, as buyers of all incomes continued to take advantage of relatively low mortgage rates, according to the National Association of Realtors.

The association recorded a seasonally adjusted annual sales rate of 3.59 million existing single-family homes nationwide last month, 1.4 percent above the May rate of 3.54 million units, and the fifth consecutive monthly increase. The June rate was the highest since January 1989, when the resale pace reached 3.66 million units. The resale pace was 6.5 percent above that for June 1990.

The increase in home resales, which came on the heels of a similar rise in housing starts last month, provides further evidence that the housing industry is leading the nation's economy out of an overall recession, said NAR President Harley E. Rouda. "This is a good, solid sign of recovery," he said.

He noted that although mortgage rates inched up slightly in June, the uptick did not appear to deter buy ers, and, in fact, may have stimulated activity among rate-watchers. "When rates go up, people often will go ahead with their purchases, rather than risk further increases," Mr. Rouda said.

The Federal Home Loan Mortgage Corp. reported that the national average commitment rate for 30-year, conventional, fixed-rate mortgages was 9.61 percent in June, up from 9.47 percent in May, but down by about one-half percentage point from one year earlier.

The national median existing-home price was $101,900 in June, up 3 percent from the June 1990 price of $98,900 and up 0.8 percent from the May price of $101,100. The median is a midpoint -- half the homes sell for more, half for less. The modest increase in the national price suggests that prices are still relatively soft in some areas, particularly the highest-cost markets, Mr. Rouda noted.

An increase in the national median price is not unusual during the summer months, due to the greater volume of larger, more expensive homes sold to families seeking to move before the school year begins, Mr. Rouda noted.

"If they can, families with children will move while the kids are out of school. They tend to be trading up, looking for more room than they left behind," he said. In June, the single largest percentage existing-home sales, 10.1 percent, fell in the $100,000- $119,999 range.

However, the current combination of low rates and price stability has created a "window of opportunity" for entry-level buyers, as well as those moving up, he pointed out.

"Single-digit mortgage rates have made homeownership affordable to consumers in a broad income range. First-time buyers who were priced out a year ago are now finding that they can make the stretch," he said.

The regional June resale rate posted in the Northeast, South and hTC West represented the third consecutive monthly increase in activity in those regions.

The Northeast recorded a rate of 570,000 units, up 3.6 percent from May, and up 14 percent from one year earlier. The median price there was $142,800 in June, down 3.7 percent from June 1990 and down 1.4 percent from May.

The increase in sales volume, coupled with the decline in the median price, indicates that the markets picking up are in the lower price ranges, said John A. Tuccillo, the NAR's chief economist. "Bargain hunting is continuing in the Northeast, and there are still plenty of good buys to be found," he said.

In the West, the June resale rate of 630,000 units rose 3.3 percent from May and 8.6 percent from June 1990. The median price, $146,400, was 5.6 percent higher than one year earlier, but dropped 3.7 percent from May. According to Mr. Tuccillo, the West currently is experiencing a buying pattern similar to that of the Northeast, in that much of the activity is occurring in the less expensive areas.

The South posted a resale rate of 1.49 million units for June, up 6.4 percent from May and up 11.2 percent from a year ago. The South's median price was $90,800 in June, up 1.6 percent from June 1990, and up 1.0 percent from May.

In the Midwest, the rate of existing-home sales dropped 7.1 percent from a sales spike in May to 910,000 units in June. The rate was 3.2 percent below that of one year ago. Mr. Tuccillo pointed out that May's rate -- 980,000 units -- was extraordinarily high and could not be sustained.

"The Midwest is in good shape. It contains some of the most stable, most affordable markets in the nation," he said. The median price in the Midwest was $78,200 in June, up 3 percent from June 1990 and up 0.9 percent from May.

Currently, the NAR is predicting that mortgage rates either will stay at the current level or edge downward in the months ahead. Marketplace concern over rising inflation, which surfaced early in June, has since eased, "making room" for future declines in interest rates, Mr. Tuccillo said. The NAR is forecasting interest rates for fixed-rate, 30-year mortgages to average 9.4 percent for the year.

Sales of existing single-family homes are expected to total 3.39 million units for 1991, 2.8 percent above the 1990 total. There were 2.59 million homes available for sale nationwide in June, representing an 8.6-month supply at last month's resale rate.

The National Association of Realtors is the nation's largest trade association, representing nearly 800,000 members.

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative resale pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity.

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