Home Resales Rise in West, Drop Elsewhere

The West continued to resist a three-month nationwide plunge in existing-homes sales and in March enjoyed a second straight month of higher sales, the National Assn. of Realtors said Tuesday.

In the West, existing home sales advanced in March 4.7% to 670,000 units. Also, median prices rose more than in any other region, up a strong 6.3% to $135,800.

Nationally, however, sales of existing homes dropped 4.3% in March, the third straight monthly decline, as rising mortgage interest rates made more inroads into the housing market, the trade group said. Sales of existing single-family homes dropped to a seasonally adjusted annual rate of 3.33 million units in March, the slowest pace since February, 1988.

Sales had dropped 2% in February and 9.4% in January.

But healthy economic conditions are spurring activity on the West Coast, where particularly active housing markets are dominating sales volume and prices for the entire region, NAR chief economist John A. Tuccillo said.

“We expect the West’s housing markets will continue to be hot, despite the high level of interest rates,” Tuccillo said. Still, the annual rate of housing resales in the West fell 6.3% in the first quarter of 1989, to 646,700, from 690,000 in the last three months of 1988.

The March figures were the latest in a series of reports that indicate rising interest rates are slowing the economy and taking a toll on home sales and residential construction. Last week, the government reported that construction of new homes and apartments declined 5.4% in March, the second straight monthly decline.

Because housing usually slows down in advance of other sectors of the economy, the weak performance has heightened fears that a recession could come later this year or in early 1990. The Federal Reserve Board for a year has been pushing up interest rates as part of a campaign to slow the economy and keep inflation in check.

Fixed-rate home mortgages averaged between 10.86% and 11.22% in March, up a full percentage point from a year earlier, according to the Federal Home Loan Mortgage Corp.

Ira Gribin, president of the realtors, said the higher rates are having their biggest impact on first-time home buyers. He said they are “the first to leave the market and the last who are able to get back in.”

With fewer sales last month to first-time buyers, the median price of existing homes sold rose $1,200 to $93,100, meaning half the homes sold for more and half for less.

Economist Lyle Gramley of the Mortgage Bankers Assn. said that although further declines lie ahead for the housing industry, “this is not a collapse of the housing market.”

Gramley said slower growth is “just what the doctor ordered” to dampen inflationary pressures and keep the economic expansion alive.

By region, the sharpest decline in home sales last month was in the Northeast, where the resale pace was down 10% to a seasonally adjusted annual rate of 540,000 units. Sales in the Northeast had declined 15.5% during February.

EXISTING HOME SALES

March rate: 3.33 million units, down 4.3%

Source: Commerce Department