Home Resales Up 13.6% in State During February : Economy: Price cuts and lower interest rates also helped nationwide sales jump 7.9%. The California figure is the best monthly showing in four years.
Sales of existing homes in February showed surprising strength in California as well as across the rest of the nation, providing yet another sign that the economy may be gradually rebounding.
Home sales rose 13.6% in California, and 7.9% nationwide, as price cuts and declining interest rates combined to make homes much more affordable. The California figures represented the biggest monthly gain in housing in the state in more than four years, while the national numbers marked the largest month-to-month improvement in five years.
“The February sales results are by far the most encouraging news we’ve had in a long time,” said Mack Powell, president of the California Assn. of Realtors, which issued the statewide housing figures. “People are feeling more relaxed and confident about their future.”
The sales gains came mostly in Northern California.
The reports from the National Assn. of Realtors and the California group provided more evidence that the housing slump that has plagued the country for the past year may finally be easing. The first signs of that came last week, when the Commerce Department reported that new housing construction surged to its highest levels in more than a year.
Construction of new homes and apartments shot up 16.4% in February, while applications for building permits rose a healthy 8.5%, the first increase in permit applications in eight months.
Economists now believe that the turnaround in housing may be an early hint that the recession is also winding down.
The end of the Persian Gulf War has brought a rapid recovery in consumer confidence, which many economists believe could lead to a slow but steady return in consumer and business spending from the lows posted last fall.
“We think things are starting to turn around,” said Robert Dye, a senior economist with the WEFA Group, an economic forecasting firm in Bala-Cynwyd, Pa. “Now, if you look for signs that the recession is ending, you will find them.”
Most economists have updated their forecasts since the war ended and have become more optimistic about how quickly the turnaround will come. DRI-McGraw Hill, a leading forecasting firm in Lexington, Mass., now believes that the recovery will begin in the next two or three months, with growth in the nation’s output of goods and services returning during the second quarter.
“We are expecting the recession to end this spring, with most of the rebound coming in the third and fourth quarters,” said Sara Johnson, an economist at DRI-McGraw Hill.
Still, many economists continue to worry about growing joblessness and continuing declines in industrial production. Unemployment is now expected to peak at about 7% and stay there for much of the year. Yet unemployment usually doesn’t improve until after a recession is over, so many economists believe that the recovery will begin long before the jobless rate turns down again.
The 7.9% February increase in existing home sales was the first since a 2.6% rise in October, and it was the biggest monthly gain since a 9.5% jump in April, 1986.
Home mortgage rates dipped to 9.25% in February, their lowest level since early 1987, while home prices continued to decline.
The national median price for homes sold in February was $94,800, down 0.8% from January and 0.3% below the level of a year ago. In California, the median price jumped 2.1% to $194,900, largely because of increased sales in the more expensive Northern California coastal areas.
Sales were up in every part of the country, led by a huge 20% increase in the West, where homes were sold at an annual rate of 540,000 units.
When compared to January, sales were up 8.7% in the Northeast to an annual rate of 500,000 units and up 8.6% in the Midwest, where the annual rate was 880,000 units. Homes in the South climbed 3.4% to a rate of 1.22 million units.
John Tuccillo, chief economist of the national realtors group, said he was looking for sales of existing homes this year to total 3.19 million units, helped out by further declines in interest rates. He said that fixed-rate mortgages should average 9.1% for the year.
The Associated Press contributed to this report.
THE ECONOMY Sales of existing homes nationally moved up 7.9% in February. In California, the gain was 13.6%. THE CHANGES
West: Up 20%
Northeast: Up 8.7%
Midwest: Up 8.6%
South: Up 3.4%
WHAT DOES IT MEAN?
Inflation: Home prices fell slightly in February.
Recession: Consumer confidence has rebounded since the end of the Persian Gulf War.
Interest Rates: Average mortgage rates dipped.
Source: National Assn. of Realtors.
Existing Home Sales Seasonally adjusted annual rate, millions of units Feb., ‘91: 3.13 Jan., ‘91: 2.90 Feb., ‘90: 3.42 Source: National Assn. of Realtors
