Home Sales Rise Again; Market Likely to Weaken

Sales of existing homes recovered last month from depressed levels in September. But with mortgage rates edging higher and consumer confidence waning further, analysts say the nation’s housing market will most likely weaken in the near term.

In October, though, sales of previously owned homes beat economists’ expectations, rising 5.5% from September, the National Assn. of Realtors said Tuesday.

All regions in the country showed gains last month, most dramatically in the Northeast. Sales in California were up 4.1%, reflecting comparatively weaker activity last month in the West.

Home sales throughout the nation were boosted last month by declining mortgage rates.

But the average 30-year fixed rate has been increasing since hitting a three-decade low of 6.45% three weeks ago.

And with joblessness running significantly higher in recent weeks, most analysts agree that home buying will soften in the next few months.

A Conference Board survey released Tuesday showed that in November 3% of consumers were expecting to buy a new home, down from 3.5% in October.

“The housing market hasn’t totally run out of gas yet, but rising unemployment will eventually overcome lower mortgage rates and cause a softening in sales,” said David Orr, chief economist at Wachovia Securities in Charlotte, N.C.

Homes sold last month at an annual pace of 5.17 million units, up from a 4.9-million rate in September. The sales pace was about 1.9% above the rate in October 2000.

The latest report shows there is a healthy demand for housing, said David Lereah, chief economist for the Realtors trade group in Washington. But he acknowledged that “we have some way to go before we reach record activity again.”

Home resales recorded the smallest rate of growth in the West at 1.6%. The median home price last month rose to $145,300, up 5% from the same month last year, reflecting fewer homes on the market nationwide.

Sales of previously owned homes are considered a significant indicator of consumer demand, accounting for about 85% of sales.

In California, sales last month rose 4.1% from September, indicating that real estate activity was returning to normal in several areas of the state after the terrorist attacks, according to a separate report by the California Assn. of Realtors.

The market remained sluggish in the San Francisco Bay Area, while sales rose in Los Angeles and Orange counties, reflecting higher demand in a tight market.

The median price of a single-family home sold in California last month was $272,570, an increase of 8.5% from the same time last year. Leslie Appleton-Young, chief economist for the state’s Realtors, attributed the increase, in large part, to scant construction of new homes in coastal areas where demand outstrips supply, making available homes more expensive.