Home Sales Increase 2.5% in March

Sales of existing homes, spurred by lower mortgage rates, edged up 2.5% in March for the second month in a row, a real estate trade group said Monday.

The National Assn. of Realtors said existing single-family homes were sold at a seasonally adjusted rate of 3.33 million units last month.

Despite the March rise, which followed an identical 2.5% increase in February, the rate of sales remained 9.8% below March, 1987. The sales pace had dipped in November, December and January.

“Housing activity has recovered from the low levels of (the winter), but even so we can expect to see fewer sales . . . in 1988 than in 1987,” said Mark Obrinsky, an economist with the U.S. League of Savings Institutions.

John A. Tuccillo, the Realtors’ chief economist, attributed the sales increase to lower interest rates.

“Lower interest rates have been the motivating force behind bringing the consumer back into the market and keeping home sales at a healthy level,” Tuccillo said .

“We can sustain this level through the remainder of the year, despite the prospect of gradually increasing interest rates,” he said.

“Our current forecast is for home prices nationwide to increase only modestly for the remainder of the year,” Tuccillo said.

The Federal Home Loan Mortgage Corp. said the national average for 30-year conventional fixed-rate mortgages was 10.30% last week, compared to the 1988 low of 9.92% in the week ended March 18.

The average interest rate for adjustable-rate mortgages was 7.61% last week, compared to the 1988 low of 7.49% in the week ended March 18, Freddie Mac said.

A year ago, 30-year fixed-rate mortgages bottomed out at just above 9%. They rose in spurts, topping 11.5% in early October. Rates eased after the stock market crash, dipping just below 10% in February and March.

Obrinsky said interest rates were likely to rise slowly and steadily this year, but he said that would disrupt sales less than the sharp jumps taken by interest rates in 1987.

“I think on balance we could see sales still hold up for some months down the road before the impact of the higher mortgage rates begins to take its toll,” he said.

The March sales increase was accompanied by a 4.1% rise in prices to a national median, or midpoint, of $88,700, up from $88,100 in February. Tuccillo predicted only modest increases for the rest of the year.

By region, the median resale price was $143,100 in the Northeast, compared to $128,900 a year ago; $117,100 in the West, compared to $105,900; $84,000 in the South, compared to $81,200, and $67,800 in the Midwest, down from $68,300.

Sales were led by a 9.6% advance in the West to a seasonally adjusted annual rate of 570,000 units and a 6.7% boost to 1.27 million units in the South. Sales were unchanged in the Northeast at 660,000 units and down 3.4% in the Midwest to 860,000 units.