REAL ESTATE

U.S. HOME SALES, PRICES REACH ALL-TIME HIGH

Sales of existing homes in America rose a surprising 2.7% to a record in June as the lowest average 30-year fixed mortgage rates in more than a year helped drive prices to an all-time high.

“The red hot housing market just got hotter,” the chief economist at Mesirow Financial Incorporated in Chicago, Diane Swonk, said. “This is going to boost spending, job creation, and economic growth in the second half of the year.”

Sales increased to an annual rate of 7.33 million, surpassing the previous record of 7.18 million reached in April, the National Association of Realtors said yesterday in Washington. The median home sales price rose to $219,000 from May’s $206,000, a 6.3% jump that was the biggest on record.

The sales jump exceeded all estimates in a Bloomberg News economist survey, and the 14.7% price gain from June 2004 was the largest since November 1980. Mortgage rates have been holding just above a four-decade low, stoking demand and leading economists including Federal Reserve Chairman Alan Greenspan to say the price gains in some areas may be unsustainable.

While prices have risen five times as much as inflation, incomes are rising fast enough and mortgage rates are low enough to keep homes affordable. The Realtors group reported on June 29 that its housing affordability index rose to 122.8 in May from 122.3 a month earlier. Readings greater than 100 signal a family making the median income has enough money to qualify for the median-priced home at prevailing mortgage rates. The index has averaged 135 in the last two years.

– Bloomberg News

WALL STREET

TWO NYSE SEATS SELL; PRICE FALLS SHORT OF RECORD

Two New York Stock Exchange memberships sold for $2.6 million yesterday, $50,000 short of the August 1999 record set during the bull market in American stocks. The memberships, known as seats, sold yesterday for $190,000 more than the last sale on July 6, a 7.9% increase, the exchange said in a statement. The Big Board’s proposed takeover of Archipelago Holdings Incorporated, which will turn the 213-year-old institution into a for-profit public company, has revived interest in memberships. Prices have increased 60% since April 20, when the deal was announced.

– Bloomberg News

SEC MAY RECOMMEND CIVIL ACTION AGAINST FIDELITY

Fidelity Investments said the staff of the Boston office of the Securities and Exchange Commission is considering recommending a civil action against the company related to regulators’ investigation of gifts and gratuities from brokers that do business with the trading desk of the mutual-fund giant.

Fidelity, based in Boston, said it has been cooperating and intends “to vigorously defend ourselves against any allegations that we believe are not supported by relevant facts and data.” The company said its own internal review has “uncovered instances’ when its own policies and procedures have been violated and that has caused the company “deep concern.” Fidelity said it had received a “Wells Notice,” which gives the target of an inquiry the chance to defend itself and explain why it shouldn’t be charged. A number of former traders have received such notices as well in recent weeks, according to people familiar with the matter.

Fidelity, the nation’s largest mutual-fund company, manages $1.1 trillion in assets. Its announcement comes amid a broad regulatory probe into gift-giving and entertainment on Wall Street by the SEC and the National Association of Securities Dealers. Regulators want to know whether favors bestowed on Fidelity employees may have influenced how the Boston mutual-fund company doled out its trading business. Fund companies are supposed to choose brokers based on service and price, not favors and gifts. Fidelity traders have accepted lavish gifts from brokerage firms, including trips to expensive sporting events such as tennis at Wimbledon and flights on private aircraft.

– Dow Jones Newswires