Home sales slow a bit but stay strong

Even with dip in Oct., new-home deals reach 5th-highest annual rate

November 30, 2003|By BLOOMBERG NEWS

Two national housing reports released last week showed sales are beginning to slow from their frenzied pace but industry experts said the figures continue to show healthy activity in a sector that has boomed during the past three years.

New homes sold at a 1.105 million annual pace last month, down 3.5 percent from 1.145 million in September, the Commerce Department said Wednesday. The October sales rate was the fifth-highest on record. Sales of new homes, which totaled 974,000 last year, reached a record 1.2 million pace in June.

In a report released Tuesday, the National Association of Realtors said existing home sales totaled 6.35 million at an annual pace last month, down 4.9 percent from the best-ever rate of 6.68 million in September. A record 5.99 million existing homes will be sold this year, according to association forecasts.

October mortgage rates declined from September and averaged less than a percentage point higher than June's record low of 5.21 percent. The economy gained jobs for a third month in October, and an improving labor market might sustain demand at real estate companies such as Cendant Corp. even as interest rates edge higher.

The median price of new homes rose last month to $190,900 from $189,900 in September. Prices are up 0.9 percent over the past 12 months.

The inventory of new homes for sale rose to a 4.0-month supply from 3.7, the report showed.

Sales of new homes declined in all regions. In the Northeast, deliveries dropped 3.3 percent to an annual pace of 87,000 last month. Sales fell 9.4 percent in the West to an annual rate of 299,000, 0.5 percent in the Midwest to 203,000 and 1 percent in the South to an annual rate of 516,000.

The number of new homes for sale jumped 4.3 percent to 360,000 last month from 345,000 in September. The median number of months that new homes have been for sale declined to 3.8 months from 4.0.

The 30-year fixed mortgage rate averaged 5.95 percent in October, down from 6.15 percent the previous month, according to figures from Freddie Mac, the No. 2 purchaser of U.S. mortgages.

"We do expect to see some slowing in sales next year because of the increases in interest rates since June, which, while modest, will eventually have an effect," said Michael Carliner, an NAHB economist. "These would still be extraordinarily high levels" for sales.

A record 5.57 million existing homes were sold last year. Existing homes account for 85 percent of the residential real estate market.

Resales were lower in all regions. They dropped 2.7 percent in the Northeast to a 730,000-unit pace, 4.9 percent in the Midwest to a rate of 1.36 million units, 2.7 percent in the South to 2.57 million units and 9.2 percent in the West to a 1.68 million-unit rate.

The supply of homes available for sale, another gauge of housing demand, rose to 4.6 months' worth in October from 4.3 the previous month.

The median price of a home jumped 8.2 percent to $172,400 last month from October last year. The median price was up 0.3 percent from September's $171,800.

"We continue to be as optimistic as we have been," said Richard Smith, chairman and chief executive of Cendant Corp.'s real estate services division. Cendant, based in New York, is involved in one out of every four home sales through its NRT Inc., the largest owner of U.S. brokerages, and through Cendant's franchising of the Coldwell Banker Residential Brokerage, Century 21 and ERA brands.

"It's an extraordinary year by any stretch of the imagination," Smith said.

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