Jump in Home Resales Hits 7-Year High : Real estate: A scramble to lock in mortgage interest rates is cited in the 31.3% rise in California over a year ago.
A rush to lock in lower mortgage rates, coupled with reawakening consumer confidence, dramatically boosted sales of existing homes in California in March, easing immediate fears that the recent rise in interest rates will stall the state’s nascent economic recovery.
Home sales last month jumped 31.3% compared to March, 1993, the 10th consecutive monthly increase and the largest rise in seven years, according to a report released Monday by the California Assn. of Realtors. Nationally, existing home sales rose 18.4% in March compared to a year ago, to a seasonally adjusted annual rate of 4.06 million units.
The results prompted some economists to predict that home sales in 1994 will hit near-record levels nationally, despite increases in fixed-rate mortgages of more than 1.5 percentage points since last fall.
However, several economists were more cautious, noting that it is still too early to gauge the full impact of rising interest rates on the nation’s and state’s housing markets.
“The real test is still ahead,” said Gary Schlossberg, vice president and senior economist at Wells Fargo Bank in San Francisco. “The latest figures provide only a snapshot of the past, not necessarily a glimpse of future. We believe that the interest rate increases certainly won’t kill the housing recovery, but it could be weaker than we had projected earlier.”
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Last week, for the third time this year, the Federal Reserve Board raised its federal funds rate--the rate banks charge each other on overnight loans--to keep the national economy from overheating. As a result, banks and other lenders have made corresponding increases in consumer interest rates.
For example, the average 30-year, fixed-rate mortgage in the United States rose to 7.68% in March from 7.15% in February, the Federal Home Loan Mortgage Corp. said, adding approximately $50 to the monthly mortgage payment of a typically priced home nationwide.
The Mortgage Bankers Assn. of America predicted that the average 30-year mortgage will climb to 8.90% by the end of the year and increase to 9.15% in 1995. The rate now stands at about 8.55%.
Several analysts noted that many potential home buyers were pushed off the fence when mortgage rates, which reached their lowest level in a generation in October, began to rise markedly in February. With buyers seeking to lock in lower rates, sales in March surged.
The realty organization reported that 510,590 existing, single-family detached homes in California closed escrow during March on a seasonally adjusted annual basis--up 0.9% from a revised rate of 506,270 homes sold in February. The annualized figure represents the total number of homes that would be sold during 1994 if sales occurred at the March pace throughout the year.
In California, where housing remains far more expensive than the rest of the country, the median price of an existing, single-family detached home in March was $183,840, up 1.6% from a revised $180,980 in February. The median price is the point at which half the homes sold for more and half for less.
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Nationally, sales of existing homes rose 5.7% in March to a seasonally adjusted annual rate of 4.06 million units, compared to a revised rate of 3.84 million in February. The national median price of all homes sold in March was $107,400, up from $106,900 in February.
Some economists also attributed the national sales increase to a catch-up following a harsh winter throughout much of the nation. But in California, where the weather was dry and warm this winter, economists cited increased consumer confidence and an improved economy for the resale surge.
“The economy is growing and people are becoming more confident about their jobs and their income,” said David Berson, chief economist for the Federal National Mortgage Assn. “There’s a boomlet under way in California, and the state should get even stronger for at least the next two years while the earthquake rebuilding continues.”
Berson said newfound consumer confidence in the nation--as well as California--is clearly a factor, because both housing prices and mortgage rates were lower within the last six months and housing sales remained stalled. “Rates can be low,” he said, “and people won’t buy if they don’t feel confident.”
California Home Sales
Figures are for single-family detached homes. Seasonally adjusted, in thousands of units
March, ‘94: 510.8
Source: California Assn. of Realtors
U.S. Existing Home Sales
Seasonally adjusted annual rate, in millions of units
March, ‘94: 4.06
Source: National Assn. of Realtors
