Sizzling market makes '04 record housing year

6.14 million existing homes are sold, eclipsing '03 total

December 30, 2004|By BLOOMBERG NEWS

WASHINGTON - U.S. sales of previously owned homes rose 2.7 percent to a record in November, making 2004 the best year ever for housing.

Existing homes sold at a 6.94 million annual rate, up from a 6.76 million pace in October, the National Association of Realtors said yesterday. A record 6.14 million existing homes have been sold this year, surpassing the 6.1 million in 2003.

Sales rose 6.5 percent in the West to an annual rate of 1.97 million, 1.8 percent in the South to 2.83 million, and 0.7 percent in the Midwest to 1.39 million. Sales fell 1.3 percent in the Northeast to 740,000.

"The real estate market just went from red hot to white hot," said James Gillespie, chief executive of Parsippany, N.J.-based Coldwell Banker Real Estate.

The creation of more than 2 million jobs in the past year, income growth and 30-year mortgage rates below 6 percent have bolstered housing and the economy as homeowners spend more on furnishings and appliances.

The median selling price of an existing home was $188,200 last month, up 1.5 percent from $185,400 in October, statistics showed. The median price is up 10 percent from the year-earlier month, the biggest 12-month jump since July 1987. Sales rose in the West, South and Midwest and declined in the Northeast. The inventory of houses for sale held at 4.3 months.

"The combination of payroll growth and wage growth, vigilant monetary policy and favorable demographics could produce the second-best housing sales ever in 2005," said John Herrmann, chief U.S. economist at Cantor Fitzgerald LP in New York. "We think it may come very close to this year's record pace."

Economists forecast a 6.75 million annual rate of previously owned home sales in November, the same as the previously reported pace for October, according to the median of 46 economists surveyed by Bloomberg News.

Existing homes account for 85 percent of the residential real estate market in the United States. The National Association of Realtors expects 6.38 million previously owned homes to be sold in 2005, the second-best on record.

The statistics run counter to other housing market reports this month. New-home sales dropped 12 percent in November to an annual pace of 1.125 million, the Commerce Department said Dec. 23. The pace was the second-slowest of the year. Housing starts fell to 1.771 million from 2.039 million in October, the biggest drop since January 1994, the department said Dec. 16.

The drop in new-home sales was "an anomaly," said David Lereah, the Realtor association's chief economist. "The housing markets are very healthy."

Lereah said new-home sales are erratic and the figures often get revised, so it's best to look at an average over three or four months to get a more accurate picture.

U.S. 30-year mortgage rates averaged 5.84 percent in 2004, holding near last year's record low of 5.83 percent and helping drive home sales to all-time highs, Freddie Mac said yesterday.

Another report yesterday showed that applications to buy homes rose 2.7 percent last week.

Borrowing costs remain at a level that's supporting sales, even after five straight increases since June in the Federal Reserve's benchmark overnight bank lending rate. Mortgage rates typically are tied to longer-term rates.

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