Best Year Ever for Sales of Previously Owned Homes

American sales of previously owned homes rose to a record in November, buoyed by job and income growth, making 2004 the best year ever for the industry.The Washington-based National Association of Realtors reported today a 2.7% rise to a 6.94 million annual rate for the month after October’s 6.76 million pace. This year, 6.14 million previously owned homes have been sold, surpassing last year’s record of 6.1 million in 2003.“The real estate market just went from red hot to white hot,” said the president and chief executive officer of Parsippany, N.J.-based Coldwell Banker Real Estate Corp., James Gillespie, in an interview.The creation of more than 2 million jobs in the last year, income growth, and 30-year mortgage rates below 6% have bolstered housing and the economy as homeowners spend more on furnishings and appliances.“The combination of payroll growth and wage growth, vigilant monetary policy and favorable demographics could produce the second-best housing sales ever in 2005,”said the chief American economist at Cantor Fitzgerald LP in New York, John Herrmann. “We think it may come very close to this year’s record pace.”The statistics run counter to other housing market reports this month. New home sales dropped 12% in November to an annual pace of 1.125 million, the Commerce Department said December 23. The pace was the second slowest of the year. Housing starts fell to 1.771 million from 2.039 million in October, the biggest drop since January 1994, the department said December 16.The drop in new home sales was “an anomaly,” said the realtor association’s chief economist, David Lereah. “The housing markets are very healthy.” He said new home sales are erratic and the figures often get revised, so it’s best to look at an average over three or four months to get a more accurate picture.Previously owned homes are based on contract closings rather than signings like statistics for new home sales. So, the resales data tend to lag changes in market conditions.Economists forecast a 6.75 million annual rate of previously owned home sales in November, the same as the previously reported pace for October, according to the median of 46 economists surveyed by Bloomberg News.The median selling price of an existing home was $188,200 last month, up 1.5% from $185,400 in October, today’s statistics showed. The median price is up 10.4%, the biggest 12-month increase since July 1987, from the same month last year. The inventory of houses for sale held at 4.3 months.The benchmark 4 1/4% Treasury note maturing in 2014 rose 1 /8, pushing the yield down 1 basis point to 4.28% as of 10:45 a.m. in New York.Existing homes account for 85% of the residential real-estate market in America. The National Association of Realtors expects 6.38 million previously owned homes to be sold in 2005, the second-best on record.“I do think we have peaked,” Mr. Lereah said. “We should start to see some modest drops in existing home sales as mortgage rates modestly rise.” He expects that the 30-year fixed mortgage rate will average 6.4% to 6.5% next year.A report earlier today showed applications to buy homes rose 2.7% last week. The Mortgage Bankers Association’s index increased to 483.8, close to the record 501.6 reached in January.“2004 was a record and I think 2005 would be a little better than 2003,” said the chief executive officer of Quicken Loans Inc., William Emerson, in an interview from Farmington Hills, Mich. “When you see job creation, people feel stronger about how they want to spend their money. When they do that, it bodes well for housing.” Quicken is the largest American online mortgage lender.Borrowing costs remain at a level that’s underpinning sales. The average rate on a 30-year fixed-rate mortgage was 5.73% in November and has been below 6% since the end of July. At November’s rate, the cost for each $100,000 borrowed is about $582 a month, compared with $550 when the rate was an all-time low 5.21% last year.The National Association of Realtors’ expects average mortgage rates of 6.4% in 2005 compared with 5.8% so far this year.“Low mortgage rates have driven the housing market to quite a few records the past two or three years,” said the chief economist at 1135 999 1203 1011Briefing.comin Boston, Tim Rogers. “I don’t really expect home sales to stall until long-term mortgage rates rise another percentage point and that’s at least a year off. We may not see higher highs in sales, but we won’t experience a big drop either.”Sales rose 6.5% in the West to an annual rate of 1.97 million, 1.8% in the South to 2.83 million, and 0.7% in the Midwest to 1.39 million. Sales fell 1.3% in the Northeast to 740,000.The American homeownership rate in the third quarter was 69%, close to the record 69.2% in the prior three months, the latest government figures showed.Homebuilders remain optimistic. The National Association of Home Builders’ measure of builder confidence rose to its highest level of the year in December.“There’s incredible demand in this country bumping up against a very limited supply of homes,” the chief executive of Toll Brothers Inc., Robert Toll, said yesterday in a phone interview while on vacation in Telluride, Colo.“This level of home sales is sustainable,” he added.Huntingdon Valley, Pa.-based Toll is the largest American builder of luxury homes.

Best Year Ever for Sales of Previously Owned Homes

Best Year Ever for Sales of Previously Owned Homes

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