Home Resales Surge To Record Level

Sales of previously owned homes rose briskly in December, helping to make all of 2002 the best-ever year for sales as home buyers took advantage of the lowest mortgage rates in decades and opted to make a big-ticket financial commitment despite the lackluster economy.

The National Association of Realtors reported Monday that existing-home sales rose to a seasonally adjusted annual rate of 5.86 million last month, representing a 5.2 percent increase from November's level.

The annualized rate reflects how many homes would sell if the same number of sales in a month continued for all 12 months.

For all of 2002, sales set a new annual record of 5.56 million, shattering the previous record of 5.30 million reached in 2001.

The housing market has been one of the few bright spots for an economy struggling to regain its footing after being knocked down by the 2001 recession.

"Exceptionally low mortgage interest rates are the primary factor in record levels of home sales," said David Lereah, the association's chief economist.

On Wall Street, stocks sagged on fears about a possible war with Iraq. The Dow Jones industrial average was down 72 points and the Nasdaq was off 7 points in morning trading.

The average interest rate on a 30-year fixed-rate mortgage was 6.05 percent in December, a record monthly low, the association said. For 2002, the average rate on a 30-year mortgage was 6.95 percent, the lowest annual average since Freddie Mac, the mortgage giant, began tracking them in 1971.

Low mortgage rates encouraged many people to buy homes last year or refinance the one that they already owned. The extra monthly cash that homeowners save by refinancing mortgages at lower rates has helped consumer spending remain the primary force keeping the economy going.

Another factor motivating home buyers is solid appreciation of housing values. That offers people attractive investment, especially given the turbulent stock market, economists say.

The national median home price last year was $158,300, up 7.1 percent from 2001. The median price is where half sell for more and half sell for less. The 7.1 percent increase was the largest annual increase since 1980, when the median sales price shot up by 11.7 percent.

By region, existing home sales in the Midwest jumped 12.4 percent in December from the previous month to a seasonally adjusted annual rate of 1.36 million. In the South, sales rose 4.6 percent in December to a rate of 2.29 million. In the West sales went up 2 percent to a rate of 1.56 million and in the Northeast, they increased 1.6 percent to a rate of 650,000.

Economists believe the Federal Reserve will hold short-term interest rates at a 41-year low of 1.25 percent at the close of a two-day meeting Wednesday. By keeping rates low, policy-makers hope consumers will continue to spend and that businesses might be motivated to step up investment, forces that would help the sputtering recovery.

President Bush has offered a 10-year, $674 billion package — comprised mostly of tax cuts — which is aimed to help boost economic growth.