Home Sales Increase 2.9% in May

Sales of existing homes in California fell almost 13% in May from a year earlier, but were up 2.1% from April, the California Assn. of Realtors said Monday.

Nationally, sales of previously owned homes rose 2.9% to a seasonally adjusted annual rate of 5.37 million units in May, from a revised pace of 5.22 million in April.

Given that many economists were predicting that sales nationwide would fall or be flat last month, the better-than-expected performance left analysts marveling at the industry’s resilience in the face of the economic slowdown that has gripped the country.

The main reason the housing market has remained stable during the slowdown is because mortgage rates have stayed low. Though rates crept up in May from April, they are down more than a full percentage point from May 2000.

“The unsinkable housing market continues to prop up the economy,” said economist Joel Naroff of Naroff Economic Advisors.

For this year, the 5.37-million rate is second only to the pace of 5.43 million posted in March.

In California, sales totaled 505,590 in May on a seasonally adjusted basis, compared with 580,540 in May 2000. Despite the year-over-year decline, 2001 is expected to be one of the best years on record for California real estate, said CAR President Gary Thomas.

The median price of an existing single-family home in the state climbed 6.9% to $257,060, up from $240,460 in May 2000.

Nationally, the median price for an existing home rose 5.7% from a year ago to a record $145,500.

“Demand is still very high, interest rates remain close to historic lows and many people are confident about their own economic future,” said David Lereah, the association’s chief economist.

The average rate on a 30-year fixed-rate mortgage in May was 7.15%, up from 7.08% in April, but well below the 8.52% in May 2000.

To stave off recession, the Federal Reserve has slashed interest rates five times this year, driving down borrowing costs to their lowest point in seven years. Many analysts are expecting a sixth cut Wednesday.

The housing report showed that by region, sales rose 3.8% in the South and increased 3.5% in the Midwest, while they rose a more modest 2.3% in the West. Sales in the Northeast were unchanged.

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Existing-Home Sales

Seasonally adjusted annual rate, in millions of units:

May: 5.37 million

Source: National Assn. of Realtors