Existing Home Sales Reach All-Time High in 2001

Despite devastating circumstances in 2001, Americans showed amazing resilience and snapped up existing homes, pushing sales to an all-time high.

Sales of previously owned homes soared to a seasonally adjusted 5.25 million for all of 2001, a 2.7 percent increase from the 5.11 million homes sold in 2000, the National Association of Realtors reported Friday.

The record 5.25 million homes sold last year surpassed the association's previous record of 5.21 million recorded in 1999, when the economy was booming.

Although the country tipped into recession in March and was dealt another severe blow by the Sept. 11 terror attacks, home sales remained strong. Low interest rates during the year were a major factor in keeping the housing market - one of the few bright spots of the economy - sturdy, analysts said.

The average rate for a 30-year fixed-rate mortgage in 2001 was 6.97 percent, the association said, citing figures compiled by Freddie Mac, the mortgage company. That was the lowest annual average rate since 1998, the association said.

Low mortgage rates are ``one of the fundamental factors in the favorable market conditions that we expect to prevail for this year as well,'' said David Lereah, chief economist for the National Association of Realtors.

Should the economy rebound this year as many economists predict, mortgage rates also are expected to rise.

Still, Lereah predicted 30-year mortgage rates should average 7.30 percent in the second half of the year. ``Still pretty good in historic terms,'' he said.

To revive the economy, the Federal Reserve (news - web sites) cut short-term interest rates 11 times last year, which had the effect of pushing the prime interest rate - a benchmark for millions of consumer and business loans - down to its lowest level since November 1965.

Federal Reserve Chairman Alan Greenspan (news - web sites) told Congress on Thursday that he saw mounting signs that the economy is recovering from recession. As part of this assessment of the economy, Greenspan mentioned the strength of the housing market.

Low mortgage rates has spurred a wave of refinancing of existing homes and the resulting cash from that has helped support consumer spending during the slowdown, Greenspan said. Consumer spending accounts for two-thirds of all economic activity.

In December, existing-home sales dipped by 0.8 percent from the previous month to a seasonally adjusted annual rate of 5.19 million.

By region, sales rose by 0.9 percent in the Midwest to a rate of 1.18 million in December and they went up by 0.7 percent in the West to a rate of 1.38 million. But in the Northeast, sales declined by 1.6 percent to a rate of 630,000, and in the South they fell by 2.4 percent in December to a rate of 2 million.

Despite the dip in sales in December, home prices rose. The median existing-home sales price, meaning half sold for more and half for less, rose 8.4 percent to $151,400 in December from the same month a year ago.

For all of 2001, the median sales price was $147,500, a 6.1 percent advance from the median price of $139,000 in 2000.

The Associated Press contributed to this report.