THE ECONOMY : Existing Home Sales Bounce Back in June
Falling mortgage rates helped spur a 5.9% rebound in existing homes sales last month after five months without a gain, a real estate trade group said Tuesday.
Analysts said they expected continued improvement but cautioned that sluggish economic growth likely would prevent anything stronger than a modest resurgence.
The National Assn. of Realtors said sales of existing single-family homes sold at a seasonally adjusted annual rate of 3.4 million units in June, up from May’s rate of 3.21 million units.
It was the first increase in sales since December, 1988, and the largest increase since December, 1986, when sales jumped 6.6%.
“Finally, the existing home market responded to the decline in interest rates,” said economist Richard Peach of the Mortgage Bankers Assn. of America, who predicted modest improvement through the summer.
According to the Federal Home Loan Mortgage Corp., fixed-rate mortgages during June fell to 10.07% from 10.48% and edged down to 9.87% last week. Analysts expect a small additional drop.
However, Peach warned that fewer new jobs and lackluster economic growth overall will keep existing home sales near 3.4 million units this year, well below last year’s nine-year high of 3.59 million units.
“We don’t think the underlying demand is strong enough to create much of a surge,” he said.
Realtors President Ira Gribin said lower mortgage rates, by making monthly payments more affordable, spurred cost-conscious buyers in June to purchase moderately priced homes.
On Monday, the California Assn. of Realtors reported sales of single-family houses in the Los Angeles area in June fell 8.2% from the previous month. Statewide, sales fell 9.2% from May and were down 13.9% from a year earlier.
Sales in the Midwest, where prices are lowest, showed the sharpest increase, while sales in the Northeast, where prices are the highest, declined.
EXISTING HOME SALES: Seasonally adjusted annual rate, millions of units; June ‘89: 3,40 Source: National Assn. of Realtors
