- The Washington Times - Tuesday, February 25, 2003

WASHINGTON, Feb. 25 (UPI) — The National Association of Realtors said Tuesday sales of existing single-family homes rose 3 percent in January to a record seasonally adjusted annual rate of 6.09 million units as home prices continued to show strong gains.

NAR said January's sales activity was 2.2 percent above the previous record high of 5.96 million units set back in January 2002.

Most economists on Wall Street were expecting sales of previously owned homes to decline to a 5.80 million annual rate from 5.91 million a month earlier.

Existing home sales are the number of previously constructed homes with a closed sale during the month. Existing homes, also known as home resales, are a larger share of the market than new homes and indicate housing market trends.

The report provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments.

By tracking economic data such as home resales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio.

Even though home resales don't always create new output, once the home is sold, it generates revenues for the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items home buyers might purchase. The economic "ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month.

Since the economic backdrop is the most pervasive influence on financial markets, home resales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the existing home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.

David Lereah, NAR's chief economist, said the momentum of sales is huge.

"We've just finished a record year for home sales, but mortgage interest rates dropped to a new low in January. Given the demands of a growing population, and with real estate becoming the safe haven for investment, many factors are in place for a continuation of strong home sales," Lereah said.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was a record-low 5.92 percent in January, down from 6.05 percent in December. Freddie Mac started tracking interest rates in 1971.

NAR President Cathy Whatley said even with the strong momentum the association expects a temporary drop in home sales.

"About a fifth of the country was essentially shut down for the better part of a week in February due to the huge snow storm in the East, so we shouldn't be surprised to see a negative impact on home sales," she said. "However, the disruption will only postpone transactions and we should see strong housing activity throughout the year."

The latest report from the NAR showed the national median existing-home price rose 6.7 percent to $160,400 in January. The median is a typical market price where half of the homes sold for more and half sold for less.

Housing inventory levels increased 6.6 percent at the end of January with 2.27 million existing homes available for sale, which represents a 4.5-month supply at the current sales pace, up from a 4.3-month supply in December.

Regionally, the report showed existing-home sales rose 7.3 percent in the South to a record annual rate of 2.50 million units in January. The resale pace in the West rose 5.1 percent to a record annual rate of 1.66 million units while in the Northeast sales rose 4.5 percent to a pace of 690,000 units.

Homes in the Midwest were reselling at an annual rate of 1.24 million units in January, down 7.5 percent from a record-high 1.34 million-unit pace in December.

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