Home resales continue to help fuel recovery

Annual rate in February 2nd highest on record

March 26, 2002|By BLOOMBERG NEWS

WASHINGTON - Previously owned U.S. homes sold in February at the second-strongest pace on record, adding fuel to the economic recovery that a group of private economists says is under way.

Homes sold at an annual rate of 5.88 million homes, after soaring to an all-time high of 6.05 million in January, the National Association of Realtors reported yesterday. Analysts had expected a decline to 5.54 million.

Low mortgage rates had already driven sales to a record 5.3 million in 2001, which included the start of the recession.

"This points to stunning vigor in underlying demand for homes," said Jade Zelnik, chief economist at Greenwich Capital Markets Inc. in Greenwich, Conn.

The economy will probably keep expanding this year and in 2003, with little likelihood of falling back into recession, a survey by the National Association for Business Economics found.

Three-fourths of economists in the survey said the chances of a decline in gross domestic product this year or next were less than 50 percent. Only 9 percent put the odds of a so-called double-dip recession at greater than half, based on responses from 334 members. The recession began 12 months ago.

"The economic recovery is under way, and the foothold is pretty strong," said NABE President Harvey Rosenblum.

Home resales fell in three of four regions. They dropped 4.2 percent in the South to an annual pace of 2.29 million, 0.8 percent in the Midwest to 1.3 million and 3.7 percent in the West to 1.58 million. They rose 1.4 percent in the Northeast to a record 720,000.

The median price fell 0.2 percent in February to $150,000 from $150,300 the previous month.

Thirty-year mortgage rates averaged just less than 7 percent in 2001, compared with 8.05 percent in 2000. Rates averaged 7 percent in January, compared with 7.07 percent in December. Last week the 30-year mortgage climbed to 7.14 percent.

High consumer and business debt loads still put the economy at risk. Twenty-three percent of respondents to the business economists' survey said rising debt posed a threat, up from 15 percent at this time last year.

The semiannual survey showed that 49 percent considered interest-rate cuts to be the best tool for boosting growth if the economy slumps again.

Thirty-seven percent said government spending increases or tax cuts should be used if economic stimulus is needed.

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