1994’s Surge in Home Sales Expected to Taper Off This Year

Despite rising mortgage rates, sales of previously owned homes rose to the second-highest level ever last year. But a real estate trade group said Wednesday that housing activity will slow significantly in 1995.

The number of down payments on existing homes began dropping substantially in October, suggesting lower sales figures starting this quarter, the National Assn. of Realtors said. Contract closings often trail initial deposits by several months.

“My guess is that we’ll see in February and March that something has gone haywire in the real estate industry,” association President Edmund G. Woods Jr. told reporters at a briefing.

Sales of previously owned homes totaled 3.97 million last year, up 4.3% from 1993’s 3.80 million and second only to the 3.98 million in 1978, the real estate group said. All regions posted gains.

Sales also rose 1.8% in December, to a seasonally adjusted annual rate of 3.89 million from 3.82 million a month earlier.

“Those are the best numbers we’re going to see for a while,” predicted John A. Tuccillo, the organization’s chief economist.

Mortgage rates rose last year from less than 7% in February to more than 9% last month. An increase from 7% to 9% adds $209 to the monthly payment on a $150,000 mortgage.

Regionally, the West posted the biggest sales gain last year, a 7.1% advance to 865,000, including a 2.4% gain in December to an 840,000 annual rate. The region’s median price in December was $143,600, down from $143,700 a year earlier.

The Northeast had a 4.2% gain, to 595,000. Sales in December were unchanged from November at a 570,000 rate. The median price at year’s end was $134,700, down from $137,000 in December, 1993.

In the South, sales rose 3.7%, to 1.47 million, including a 9% jump in December to a 1.46-million rate. The median price was $92,400, down from $95,700 a year earlier.

Sales were up 3.1% in the Midwest, to 1.04 million, though they fell 6.4% in December to a 1.02-million rate. The December median price was $88,100, up from $85,700 at the end of 1993.