Jump in Home Resales Hits a 7-Year High in California : Real estate: A scramble to lock in mortgage interest rates is cited in the 31.3% rise in the state 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.
In Orange County, home resales rose 53.7% from February and were up 28.4% compared to March, 1993. The median price was $214,040, an increase of 4.4% from February but down 1.3% from March, 1993.
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 necessary a glimpse of the 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.”
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, 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.
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.
