California’s rebounding housing market helped push home sales nationwide to their highest level in 14 years last month, two real estate trade groups reported Monday.
The National Assn. of Realtors said October home sales across the United States were up 3.6% from September and 10% from a year earlier. In a separate report, the California Assn. of Realtors said sales in the state rose 6.6% in October from a year ago--though they were down 2% from their unusually strong September levels.
But in a third report, a group of more than 40 business forecasters said a stronger housing market next year will not be enough to make a major improvement in the nation’s economy.
The National Assn. of Business Economists said it expects that continued cutbacks in defense outlays and layoffs at some of America’s biggest corporations will limit economic growth to a modest 2.8% in 1994--the same rate expected for this year. Unemployment will ease only modestly--to a rate of 6.5% from about 6.8% expected for all of 1993.
“While the immediate prognosis for the economy is favorable, we remain concerned about the underlying strength of the recovery,” said William Dunkelberg, the trade group’s president and dean of the business school at Temple University.
The annual housing sales rate of 4.08 million in October was the highest since May, 1979, according to the National Assn. of Realtors. Sales were up 12.3% from year-earlier levels in the West, 11.4% in the South, 8.9% in the Northeast and 6.9% in the Midwest.
“Sales are supposed to drop in the fall, but housing is showing no sign of letting up,” said Robert G. Dederick, chief economist for Northern Trust Co. in Chicago. “Housing should get even better next year, and that will help the entire economy.”
A robust housing market--in both resales and home construction--creates thousands of jobs and boosts dozens of other industries, from logging companies and furniture makers to retailers who sell appliances and carpeting.
Much of the strength seen in housing so far this year has stemmed from a prolonged decline in mortgage rates. The average rate on a 30-year fixed mortgage fell to 6.83% in October from 6.91% in September and 8.09% a year ago.
Although rates rose again earlier this month, some economists said a modest increase could push home sales even higher in the months ahead.
“When rates go up, it scares the daylights out of some people and creates a ‘buy-now-before-rates-go-higher’ mentality,” said John Tuccillo, chief economist for the national real estate trade group.
California realtors said sales in Los Angeles County jumped 11.2% in October from a year earlier but eased 2.4% in Orange County. Year-to-year sales rose 6.7% in the Riverside-San Bernardino area, 8.4% in San Diego and 15% in Ventura County.
Lower prices also helped sales. The median price of a home in Los Angeles was $195,580 last month, down 1.1% from September and off 4.8% from a year earlier. Orange County’s median price of $217,380 was off 1.4% from the previous month’s and 6.8% lower than a year ago.
California’s housing market got more good news Monday when state Treasurer Kathleen Brown said her office will invest $50 million in the Community Investment Program operated by the Federal Home Loan Bank of San Francisco. The money will be distributed to eight statewide lenders who will make low-interest loans to about 325 low-income and moderate-income buyers and to developers who will build about 800 affordable apartments.
Meanwhile, Dunkelberg, president of the National Assn. of Business Economists, said the economy must grow at a rate of 2.5% just to keep the unemployment rate from rising. As a result, he said, the 2.8% growth rate expected for 1994 will merely nudge the average unemployment rate down to 6.5%.
The forecasters said consumer prices can be expected to rise 3.3% next year, after climbing 2.9% in 1993.
They said short-term interest rates should rise slightly as regulators begin to tighten lending to stay ahead of inflationary pressures, but that long-term rates for 30-year bonds and mortgages should remain about where they are today.
Existing Home Sales
Seasonally adjusted annual rate, millions of units:
October, 1993: 4.08