/www.bloomberg.com/ By Siobhan Hughes and Simon Kennedy
/www.bloomberg.com/ Washington, Oct. 25 (Bloomberg) -- U.S. sales of previously owned homes rose in September as low mortgage rates lured buyers, helping to prop up the faltering recovery.
Single-family homes sold at a 5.4 million-unit annual rate last month, up 1.9 percent from a revised 5.3 million pace in August, the National Association of Realtors said. That compares with the record 5.3 million homes sold last year and a 6.05 million-unit pace in January that was the fastest ever.
The average rate on a 30-year mortgage was 6.31 percent this week, lower than at this time a year ago and up from the three- decade low of 5.98 percent in mid-October. Low rates are likely to help the housing market complete its best year ever in 2002, surpassing last year's record.
``Housing is on a high plateau,'' said Richard Berner, chief U.S. economist at Morgan Stanley in New York, before the report. ``While the backup in rates we have seen may take some of the edge off of that, it's certainly not enough to cripple the housing market. Home sales have been strong.''
Separately, the Commerce Department reported sales of new homes rose 0.4 percent to a 1.02 million rate last month. Sales of new homes may reach 957,000 for the year, breaking the record of 908,000 sold last year, according to Bloomberg News calculations.
Previously owned homes account for 85 percent of all houses sold and are considered an important gauge of consumer demand. Home sales can stimulate spending on appliances, remodeling materials, and furnishings.
Higher Than Expected
Economists had expected existing home sales to rise 1.3 percent to a 5.35 million-unit annual pace from a previously reported 5.28 million rate in August.
Sales rose in two of four regions. The climbed 8.9 percent in the Midwest to a 1.22 million-unit pace and 2.3 percent in the South to 2.18 million units at an annual rate. Sales fell 3.5 percent in the West to a 1.37 million-unit pace and 1.6 percent in the Northeast to a 620,000-unit rate.
The median price of a home falls 2.9 percent to $159,000 last month from $163,800 in August.
The supply of homes available for sale, another gauge of housing demand, rose to 5.2 months' worth in September, from 5.1 months' worth in August.
Mortgage rates are still lower than at most points over the past three decades. The average rate on a 30-year fixed mortgage was 6.31 percent this week, according to Freddie Mac, the No. 2 buyer of home mortgages. While up from 6.15 percent a week earlier, that is still below the 6.64 percent rate at the same point last year.
Low Mortgage Costs
``The lower cost of mortgages has increased housing opportunities and means monthly mortgage costs often are very attractive in comparison with rents,'' said David Lereah, chief economist for the real estate association.
Sales may hold up in coming months: the Mortgage Bankers Association reported that an index measuring applications for home mortgages rose to 361.5 last week. That was the highest in six weeks and exceeded the high reading of 350.9 for 2001, when a record 5.3 million existing homes were sold.
``There are enough applications in the pipeline that home sales will stay higher through this year,'' said Astrid Adolfson, an economist at MCM MoneyWatch in New York, before the report. ``But then next year it will probably fall from these levels. There's no pent-up demand for housing, and with higher interest rates, you probably will knock out a few marginal buyers who are still left there to buy.''
That fits in with the real-estate group's projections. The National Association of Realtors expects a record 5.47 million homes to be sold this year and 5.28 million in 2003.
Some retailers are still benefiting from the strength of home sales this year. Bed Bath & Beyond Inc., the largest U.S. household-goods retailer, last month reported that its sales in the quarter that ended Aug. 31 climbed 27 percent to $903 million.