December New-Home Sales Set ’01 Record

New-home sales rose 5.7% in December and set a record for the year, the government said Monday, as the housing sector registered a stunning performance despite the U.S. economic recession.

“It’s the one resilient part of the economy, the one that has continued to impress throughout this recession,” said Fred Breimyer, chief economist for State Street Corp.

New homes were sold at a seasonally adjusted annual rate of 946,000 last month, up from a revised 895,000 pace in November, the Commerce Department said. December home sales were ahead of expectations of analysts polled by Reuters, who had forecast a sales pace of 925,000 units.

The sales level for the year was 900,000 units, 2.6% above the 877,000 volume for 2000. The annual figure is the highest since the government began keeping track in 1963 and exceeds the 1998 high of 886,000.

Sales of existing homes also set a record for 2001 with 5.25 million units, the National Assn. of Realtors said last week.

By region, sales of new homes last month soared 35.1% in the West, but fell in all other parts of the country, dropping 9.6% in the Midwest, 1.4% in the Northeast and 1.1% in the South.

Economists discounted the surge in the West, saying warm weather may have boosted construction.

Housing activity has remained strong throughout the U.S. economic downturn because of low interest rates and lean inventories. In one of the most aggressive rate-cutting sprees in history, the Federal Reserve cut short-term rates 11 times last year.

The popular 30-year fixed-rate mortgage fell as low as 6.45% in November, but rose to more than 7% in December, according to home finance giant Freddie Mac.

Analysts said the strong performance of residential real estate in 2001 may mean it will not contribute to an eventual U.S. economic recovery.

“I’d be somewhat sympathetic to the view that housing has nowhere to go,” Breimyer said.