Fueling an Economic Head of Steam : Home Sales, Including in California, Up Sharply as Confidence Climbs
The pace of home sales in California rose to its highest level in nearly four years, while a flurry of other economic reports issued Tuesday showed that sales activity across the United States has climbed to record levels and consumer confidence in the economy is the highest it has been since 1990.
The California Assn. of Realtors said sales statewide were made at a 542,770 annualized rate in December, 12.1% higher than November and 13.2% faster than a year ago. Sales were particularly strong in Los Angeles County.
The 524,770 figure is the number of homes that would have been sold in California if December’s sales pace had held constant throughout the year. The actual sales figures for all of 1993 are expected to be released soon.
In a separate report, the National Assn. of Realtors said sales nationwide rose to a 4.49-million rate in December, the highest level of activity ever recorded. About 3.8 million homes were actually sold in 1993, the best year for housing since 1979, the industry group said.
As they have for the past few months, analysts attributed the upswing in December home sales to low mortgage rates and rising consumer confidence. The Conference Board said Tuesday that Americans’ optimism about the economy climbed to 83.2 this month from 79.8 in December, the third consecutive monthly gain and the highest reading in more than three years.
But the board’s report also shows that a large number of consumers are still worried about their jobs, while a separate report issued by the Labor Department shows that workers are barely keeping up with inflation.
Confidence in California’s economic future was clearly shaken by last week’s earthquake, raising yet another concern about the state’s prospects for recovery.
“It’s a pretty safe bet that everybody’s confidence in L.A. has dropped since the quake,” said John Hekman, an economist and vice president at Economic Analysis Corp. in Century City. “But I think it could pick up again fairly quickly, because a lot of contractors and others are going back to work and we’ll see a lot of people getting big insurance checks that will be used to immediately stimulate the economy.”
The median price of a Los Angeles home rose 1.4% from November to $197,730. Orange County’s median price was $217,200, down 3.1%.
“It’s nice to start 1994 off with such a bang-up finish for 1993,” said Pat Neal, the California realtors group president and an Orange County real estate broker. “Sales might slow down a bit in the areas that were affected by the quake, but they’re going to rebound and catch up with other parts of the state.”
Although some analysts say the nation’s housing market must be near its peak, others said even more gains are in store.
“Mortgage applications for final purchases have been rising . . . pointing to continued strength at least through the first half of the year,” said Bruce Steinberg, an economist with Merrill Lynch & Co. in New York. “People seem more optimistic about the future, and that is boosting sales.”
The Conference Board’s report that consumer confidence climbed again this month reinforces that view. The group’s consumer confidence index jumped to 83.2, up 3.4 points for the month.
But the optimistic news from the New York research group was muted by its finding that many consumers remained uncertain about employment prospects. More than a third said jobs are scarce.
The dearth of jobs and continuing layoffs by aerospace companies and other large businesses helped keep inflationary pressures under control last year, the Labor Department said in another report Tuesday.
The agency said its Employment Cost Index rose a modest 3.5% in 1993, matching 1992’s record low. Labor costs are a key ingredient of higher prices.
Although low inflation helps millions of Americans, it was no boon for the typical worker last year. Wages and salaries rose just 3.1%, only slightly ahead of the overall inflation rate. Wages for workers in private industry will rise just 2% a year under the labor contracts signed in the fourth quarter of 1993, the department said.
Existing Home Sales
Seasonally adjusted annual rate, millions of units
Dec., 1993: 4.49
Source: National Assn. of Realtors
Consumer Confidence
From a monthly survey of 5,000 U.S. households
1985=100
Jan., 1994: 83.2
Source: The Conference Board
