Realtors Say Rising Prices May Slow Pace : Existing Home Sales Set Mark; Low Rates Cited

The lowest interest rates in nearly a decade prompted Americans to buy existing homes at a record pace late last year, but rising prices may put a damper on things, a trade association said Monday.

While sales soared to an annual rate of 4.37 million units during the fourth quarter of last year, the median home price climbed 6.5% from the fourth quarter of 1985, the National Assn. of Realtors said.

The organization said the median price is likely to increase an additional 4% this year.

Interest rates are expected to wind up 1987 at about where they were at the end of 1986, however, and that would sustain sales at a strong level, if not the record pace just posted.

The realtors’ report said the average effective interest rate for loans closed on existing homes during the fourth quarter of 1986 was 9.82%, the lowest figure since the third quarter of 1978.

The sales pace in the October-December quarter, up 15% from the three-month period from June through September of last year, topped the previous high--4.26 million units sold during the fourth quarter of 1978.

The median price went from $75,200 in the fourth quarter of 1985 to $80,100 at the end of last year. The median price means that half of the existing homes sold for less and half cost more.

“We expect mortgage interest rates to gradually decline during the first half of the year and then gradually increase toward the second half,” said John Tuccillo, chief economist for realtors association. “By the end of ‘87, they should be about where they were at the end of ’86.”

“Price increases will make it a little less clear where affordability will go,” Tuccillo said in a statement accompanying the figures, “but we do expect housing to remain affordable.”

The strong fourth-quarter sales increase was broadly based, the report said. Increases were recorded in 40 states and the District of Columbia, and 14 states had gains of 20% or more over the previous year.

Hawaii led with a 50% jump, followed by Wisconsin, 40.1%; Pennsylvania, 36.2%; California, 34.6%, and Washington, 33.1%.

The biggest loss was in Indiana, with a 17.5% decline, followed by Arizona, 5.6%, and West Virginia, 4.5%. Figures were not available for Alaska.

The median price for a single-family home ranged from $49,700 in the Grand Rapids, Mich., metropolitan area to a high of $167,800 in the Boston area, according to the NAR’s quarterly survey of 52 metropolitan areas.

The median home price declined 11.9% in the Houston area, from the fourth quarter of 1985, and the next sharpest drop was Baton Rouge, La., at 6.3%.

The median price rose 37.3% in the Providence, R.I., area and 29.5% in the Hartford, Conn., region.