Severe weather hits existing-home sales; rebound expected
Existing-home sales dropped 7.4% in December to a seasonally adjusted annual rate of 4.87 million units from an upward-revised level of 5.26 million units in November. Last month's sales activity was 5.3% below the 5.14-million unit pace in December 1999. However, 2000 tallied the second-highest sales total on record -- 5.03 million units, down 3.2% from the 5.20-million record in 1999.
Dr. David Lereah, NAR's chief economist, blamed unusual weather for the drop in sales. “Although existing-home sales rates are adjusted for seasonal factors, abnormal cold and harsh winter storms hit sales in every region of the country,” he said. “In addition, we're using seasonal factors adjusted by several consecutive mild winters, but a yellow flag has been raised over deteriorating conditions in the general economy -- when you look at overall market conditions and indicators, the outlook for housing now is mixed.
“On the positive side, the Mortgage Banker's Association's purchase index is up, on the negative side, construction permits are down and builders' confidence is waning,” he explained.
As a result, NAR's home sales forecast has been revised. “With continuing declines in mortgage interest rates, existing-home sales could rise 2.1% this year to a total of 5.14 million -- if we can avoid a recession,” said Richard A. Mendenhall, NAR president. “We expect the 30-year fixed mortgage interest rate to average around 6.75% in 2001, and that certainly will help the market in the short run.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 7.38% in December, down from 7.75% in November. It was 7.91% in December 1999. The national median existing-home price was $140,000 in December, up 4.7% from December 1999 when the median price was $133,700. The NAR is forecasting that the median existing-home price in 2001 will rise 5.2% to $146,300.
Regionally, home resales in the West slipped 2.1% from November to an annual rate of 1.43 million units in December. The pace was unchanged from December 1999. The median existing-home price in the West was $188,200, up 8.9% from the same month a year earlier.
The existing-home sales pace in the South declined 6.6% in December to an annual rate of 1.85 million units. They were 6.1 percent below December 1999. The median price of an existing home in the South was $130,600, which was 8.3% higher than December 1999.
In the Northeast, existing-home sales fell 10.6% from November to a pace of 590,000 units in December. This rate was 4.8% below December 1999. The median existing-home price in the Northeast was $139,800, up 0.2% from a year ago.
In the Midwest, homes were reselling at an annual rate of 1.00 million units in December, down 14.5% from November and 10.7% below where they stood in December 1999. The median price in the Midwest was $121,700, up 2.1% from a year ago.