Home Sales Set Record in ‘02; Robust ’03 Forecast

Sales of existing U.S. homes surged 5.2% in December, and sales for all of 2002 set a record, a trade group said Monday. The government said homeownership edged to a new high.

Sales of previously owned homes rose to a seasonally adjusted annual rate of 5.86 million units, from 5.57 million in November when sales fell 3.3%, the National Assn. of Realtors said.

“The housing sector continues to be very, very healthy in a very weak economy,” said David Lereah, the Realtors group’s chief economist.

A miserable performance by the stock market and low mortgage rates have fueled home buying and building, making the sector one of the rare bright spots in a gloomy U.S. economy.

Home sales for all of 2002 hit a record 5.56 million units; the Realtors group predicted a strong year in 2003.

“Home sales are quite robust here; it shows that low [mortgage] rates matter. Even though the job market remains weak and is offsetting some of those low rates, you can’t discount rates too much here,” said Stan Shipley, economist with Merrill Lynch in New York.

The median existing-home sales price in December was $164,000, up 7.1% from the previous year. Inventories were down 10.8% to 4.2 months’ supply at the current sales pace.

Meanwhile, U.S. homeownership rates edged up to a high in the fourth quarter of last year, the government said Monday, as low interest rates put homes within reach of owners in lower income brackets.

The Census Bureau said the U.S. homeownership rate, seasonally adjusted, moved to 68.2% in the last three months of last year. The previous high was 68% in the fourth quarter of 2001.

However, the Census Bureau cautioned that the increase is statistically insignificant.

The number of people who own their residences, 74.4 million, also is at a high, the Census Bureau said. The annual homeownership rate, 67.9%, is up from 67.8% in 2001 and also at a new high, the government said.

Homeownership among blacks, not seasonally adjusted, rose to 47.5% from 47.1% in the third quarter but was below the high rate of 48.1% recorded in the fourth quarter of 2001.

Homeownership rates for Latinos reached 49.5%, eclipsing the previous high of 48.8% in the fourth quarter of 2001, the Census Bureau said.

The reports are the latest good news about the housing sector. The Commerce Department said last week that U.S. housing starts jumped 5% to a 1.83-million-unit annual rate in December, the highest level in more than 16 years.

And U.S. 30-year mortgage rates, currently at 5.9% according to housing finance giant Freddie Mac, have been less than 6% for five weeks, unprecedented since the company began following the data in 1971. In November, rates fell to 5.85%, a level not seen since 1965.

Homeowners have traded in mortgages for ones with lower interest rates, pumping into the economy the extra cash from the increasing value of their houses.

“Even though war concerns weigh heavily on consumer spirits, consumers are still willing to enter into long-term commitments when the financing costs are favorable,” said Jade Zelnik, chief economist at RBS Greenwich Capital Markets Inc.