Used Home Sales Rise on Fear of Higher Interest Rates

Sales of existing homes, propelled by fears of rising mortgage rates, rose 3.1% in May, the fourth consecutive monthly increase, a real estate trade group said Monday.

The National Assn. of Realtors said existing single-family homes were sold at a seasonally adjusted annual rate of 3.63 million units in May, following an even larger 5.7% increase in April.

John Tuccillo, chief economist for the realtors group, said existing home sales will probably begin to decline in coming months to an annual rate of about 3.4 million units, as mortgage rates move higher.

“The anticipation of continued rising interest rates convinced home buyers to get into the market now rather than waiting,” Tuccillo said. “Existing home sales are at a peak right now, and we would expect sales to drop late in the year, because of slowly rising rates.”

Fixed-rate mortgages, which had dipped to a low of 9.84% in February, have been rising and now stand at 10.4%, according to the latest weekly survey by the Federal Home Loan Mortgage Corp.

The median price of an existing home rose $1,300 from April to May, climbing to $88,600, a 3% increase from the median sales price a year ago of $86,000.

The May sales increase was led by a 10.4% rise in sales in the Northeast, where homes were sold at an annual rate of 740,000 units. Sales rose 3.2% in the Midwest to an annual rate of 960,000 units.

Sales in the South rose 2.3% to an annual rate of 1.34 million units, while sales advanced 1.6% in the West to an annual rate of 620,000 units.

Price Increases

Of the four regions, the Northeast was again the leader in the rate of price increases, with a median sales price of $148,700 last month, 11% higher than a year ago.

The Midwest posted a 2.7% price increase to $68,300, while in the South the median sales price of $83,600 was 1.6% higher than a year ago.

In the West, the median price of $122,000 was 10.2% higher than in May, 1987.

Sales in California reached their highest level in 17 months in May, despite a shortage of houses on the market, the California Assn. of Realtors said Monday.

Joel Singer, the association’s chief economist, said the strong demand was sparked by fears of higher mortgage interest rates and growth-control proposals that could restrict the future supply of housing.

Statewide, 613,518 houses closed escrow during May on a seasonally adjusted, annualized basis--up 13.6% from an annual rate of 539,921 units in April. The May total was also up 9.4% from a year ago.

Statewide, the median detached home price rose to $160,073 in May, up 1.9% from April’s median price of $157,033 and 13.4% higher than a year ago. In May, 1987, the median home price was $141,140.

The lack of detached homes helped the state’s condominium market continue to improve during May, the association said.