- The Washington Times - Thursday, March 28, 2002

ASSOCIATED PRESS

Good weather motivated people to house hunt and favorable financing got them to lock in deals, giving new-home sales a solid increase in February.

The Commerce Department reported yesterday that sales of new single-family homes totaled a seasonally adjusted annual rate of 875,000 last month, a 5.3 percent increase over January's level.

Buying a house often prompts additional spending on such things as appliances, furniture and curtains. Given that, economists were hopeful that consumer spending, which accounts for two-thirds of all economic activity in the United States, would hold up fairly well in coming months and help the country recover from a recession that began last March.

"There's a tremendous multiplier effect of buying a home," said economist Richard Yamarone of Argus Research Corp. "Step one is buying a home. Steps two through five is putting things in it and redecorating."

In contrast to past downturns, consumers kept buying homes and other big-ticket goods throughout the recent recession.

Because of that, Federal Reserve Chairman Alan Greenspan and others have expressed concerns that consumers would have less pent-up appetite to spend, making for a less-than-sizzling recovery. Some have worried that retrenchment by consumers or other factors could send the country back into recession.

But top economic forecasters surveyed by the National Association for Business Economics recently said a "double dip" recession was unlikely this year.

And economists, pointing to a surge in consumer confidence in March, along with an improved employment picture, also expressed optimism that the recovery would gather momentum.

By region, sales of new homes rose 9.9 percent in the South to a seasonally adjusted annual rate of 410,000 in February. In the West, sales went up by 6.7 percent to a rate of 240,000. But in the Northeast, sales of new-single family homes fell 10.1 percent to a rate of 62,000, and in the Midwest sales dipped 0.6 percent to a rate of 163,000.

Economists said low mortgage rates, good weather making prospective buyers more inclined to go outdoors to house hunt, increases in home values and generally good consumer attitudes all helped to lift sales last month.

The average price of a new home in February was $223,100, a 5.7 percent increase from a year ago.

In February, the average rate on a 30-year fixed-rate mortgage was 6.89 percent, down from 7 percent in January, according to Freddie Mac, the mortgage company.

But mortgage rates, as tracked by Freddie Mac, have climbed the past three weeks as the country has bounced back from recession. The average rate on a 30-year loan rose to 7.14 percent last week.

Many economists are predicting 30-year rates will reach 7.5 percent by the end of this year.

While that would make it impossible for some people to buy a home, rates in the 7.5 percent range would still be affordable to many and would still support the housing market, economists said.

Even though the National Association of Realtors reported Monday that sales of previously owned homes dipped 2.8 percent in February, the 5.88 million sales rate was the second-highest monthly level on record.


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