Washington, Feb. 25 (Bloomberg) -- Americans bought previously owned homes at a record annual pace of 6.09 million in January, fueled by the lowest mortgage rates in four decades. Home resales unexpectedly rose 3 percent from a 5.91 million pace in December, the National Association of Realtors said. The surge follows a record year and suggests that housing is retaining strength in 2003. That may help underpin first-quarter growth as consumer confidence and business investment flag.
``The soft economy that's keeping interest rates low is benefiting the home industry,'' Bruce Karatz, chairman and chief executive officer of No. 6 U.S. home-builder KB Home, said in an interview. ``Housing affordability is at all-time highs and the interest-rate environment is very favorable.'' The average rate on a 30-year mortgage dropped as low as 5.94 percent in November and 5.93 percent in December, when buying decisions were made and mortgage rates locked in for January. The average 30-year mortgage rate last week was 5.84 percent, according to Freddie Mac, the No. 2 buyer of U.S. mortgages, behind Fannie Mae. That was the lowest rate since the 1960s. Economists had expected sales to fall 1 percent in January from a previously reported 5.86 million-unit pace for December, based on the median of 55 forecasts in a Bloomberg News survey. The median price of a home fell 1.2 percent to $160,400 last month from $162,400 in December. The supply of homes available for sale, another gauge of housing demand, rose to 4.5 months in January from 4.3 months in December.
Regional Sales
By region, sales rose 7.3 percent in the South to a 2.5 million annual pace, 5.1 percent in the West to 1.66 million, and 4.5 percent in the Northeast to 690,000. Sales fell 7.5 percent in the Midwest to a 1.24 million annual rate. The pace of January purchases extends into 2003 a record run for the housing market, whose boom period has lasted longer than some economists thought likely. Home sales broke records in 2001 and 2002 as the Federal Reserve embarked on an interest-rate cutting campaign that brought the overnight bank-lending rate to a 41-year low of 1.25 percent and has supported consumer spending.
``For the near-term, the housing market still has some life in it,'' said Geoffrey Somes, a senior economist at Fleet Bank in Boston, before the report. ``There are few signs that we're getting a significant slowing in housing demand, and that makes a lot of sense because interest rates have remained so low.'' Toll Brothers Inc., the largest U.S. builder of luxury homes, said profit for its first quarter ending Jan. 31 rose 2.1 percent $45.4 million, or 61 cents a share, as sales increased 16 percent. KB Homes is the sixth-largest home-builder based on stock- market value.
Companies Benefit
Lowe's Cos., the world's No. 2 home-improvement chain, is among the beneficiaries. The company said yesterday that fourth- quarter profit rose 46 percent, more than analyst forecasts, after the retailer opened stores in large cities in the Northeast. Its sales of appliances, home decorating items, and flooring increased. The boom in housing may settle down this year if a second- half growth spurt lifts interest rates as some economists predict. The National Association of Realtors projects sales of 5.4 million existing homes for 2003, the second-best on record, from 5.56 million in 2002. ``We're probably close to a peak in home sales,'' said Mark Vitner, senior economist at Wachovia Securities Inc. in Charlotte, before the report. ``As the economy moves from being almost entirely driven by gains in consumer spending and housing into a more balanced mix of consumer spending, business investment and non-residential construction, the economy won't need to be as dependent on housing.'' //www.quote.bloomberg.com