- The Washington Times - Tuesday, June 26, 2001

Lower mortgage rates pushed housing sales to their second-highest level of the year in May and helped insulate the real-estate industry from the rest of the slowing economy.
More than 5 million previously occupied homes were sold in the United States in May, a 2.9 percent increase from April, the National Association of Realtors said yesterday.
In the Washington area, 5,748 homes were sold last month, up 23.4 percent from the 4,659 homes sold in April, according to a local real-estate research firm.
The housing market has held up because conventional mortgage rates have dropped 1 percentage point this year from the 2000 average, said David Lereah, chief economist for the Realtors' association.
"Demand is still very high, interest rates remain close to historic lows and many people are confident about their own economic future," Mr. Lereah said.
The average rate on a 30-year fixed-rate mortgage in May was 7.15 percent, up from 7.08 percent in April, but below the 8.52 percent posted in May 2000. Mortgage rates hit a five-year high of 8.64 percent in mid-May a year ago. Last week, 30-year mortgage rates dipped to 7.11 percent.
The association released the housing sales statistics two days before the Federal Reserve is scheduled to decide whether to lower the overnight bank lending rate a sixth time this year to help boost the economy. The overnight bank lending rate is now 4 percent, the lowest since 1994.
Many analysts expect the Fed to cut the rate tomorrow, but are divided over whether the reduction will be by another half-point or by a quarter-point.
The resilient housing market has lifted companies like Long & Foster Real Estate Inc., the largest real-estate broker in the mid-Atlantic region.
Earlier this month, the Fairfax-based brokerage said sales reached $2 billion in May, a 33 percent increase from the same month last year.
It has also made housing an attractive investment, economists said.
The median price of a home rose 1.7 percent last month to a record $145,500. That compares with $143,100 in April and is 5.7 percent higher than in May of last year, according to the brokers' association.
In the Washington area, the median home price was $188,050, according to Rockville research firm Metropolitan Regional Information Systems Inc. That's up 7.6 percent from May 2000, when the medium price was $174,731. In April, the median sale price was $184,475.
The figures are based on housing sales in the District, Montgomery and Prince George's counties in Maryland, and Fairfax and Arlington counties and the cities of Alexandria and Falls Church in Northern Virginia.
"Our customers are realizing that an investment in a house will do at least as well as a stock market investment will. [They] are telling us, 'Every time I've sold a house I have made money.' They can't always say that about the stock market," said Joel Rassman, chief financial officer for Toll Brothers, the nation's largest builder of luxury homes.
Dale E. Mattison, an associate broker in the Washington area for Long & Foster, said a limited inventory of available homes in the region has also made housing a good investment.
"It's good if you're on the selling side. You can offer your property and be firm on the price," Mr. Mattison said.
The housing market in the Washington area has been boosted by the region's stable job growth, said Stephen S. Fuller, a public policy professor at George Mason University who studies local economic trends.
The Washington area could produce 98,000 new jobs this year, a decline from the number of jobs produced in 2000 but an increase from growth in 1999, Mr. Fuller said.
"The housing market is so strong here because we're still generating jobs. We haven't slowed down in 2000," he said.
Home resales account for 85 percent of all houses sold and are considered a harbinger of consumer demand because they tend to stimulate spending at furniture, appliance, and home-improvement stores.
Last week, Bed, Bath & Beyond Inc., the nation's biggest home-furnishings retailer, reported a 33 percent rise in profit during the fourth quarter, which ended March 3.
Another furnishings chain, Pier 1 Imports Inc., said last week its year-to-date sales are up 8.6 percent, to $325 million. In May, sales were up 10.4 percent from May 2000, the company said.
"The beautiful thing about home sales is that they influence other sectors. The biggest spinoff is construction, but retail is also affected," said Anirban Basu, director of applied economics for RESI, Towson University's economic consulting arm.
This article is based in part on wire service reports.

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