Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.ibd From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: \TITLE Date: Tue, 27 Oct 92 16:00:26 EST Message-ID: <12.1992Oct27.160026@AmeriCast.com> 10/27/92 TITLE #m#ak/tlj#m#Existing-Home Sales Off 0.9% Last Month They Were Up 5.1% Over 1991, But Market Remains Weak Robert Corrigan Existing- home sales in September fell to their lowest level in eight months, according to the National Association of Realtors, adding bad news to other recent reports that show slightly better conditions for the housing sector. Resales were off 0.9% from August, when sales fell sharply. Com- pared with September 1991, sales actually rose 5.1%, though the market was depressed in that month compared with most of last year. The lower monthly number surprised economists, who had been looking for a slight increase, according to a survey last week by MMS International. Matt Alexy, an economist at First Boston Corp. in New York, said low mortgage rates and recent re- ports of increased buyer interest in new-home projects had indi- cated that resales might be better for September. "This doesn't suggest any kind of significant improvement in the economy," he added. The NAR said in its report yesterday that sales of existing homes fell to a seasonally adjusted annual rate of 3.28 million units in September from August's revised 3.31 million units. The com- parable rate in September of 1991 was 3.12 million units. August's originally reported rate of 3.34 million units had indi- cated a monthly decline of 3.2% from July. With yesterday's revi- sion, that drop increased to 4.1%. September's rate was the lowest since the 3.22 million-unit rate recorded in January. The resale rate had advanced in March to a 1992 high of 3.51 million units, reflecting sharply lower mortgage rates and rising consu- mer confidence. But in five of the six months since then sales have pulled back. James Fralick, senior economist at Morgan Stanley & Co. in New York, said the lack of job security and bleak forecasts of future income growth are keeping buyers at bay. "People are just too concerned about their job prospects right now to take on a lot of new debt," he said. Most of the sales taking place are in low-end markets where homes are most affordable, according to NAR. The move-up market, where buyers purchase larger homes and take on more debt, is faring poorly. Other indicators released recently Existing-Home Sales Off 0.9% Last Month have been marginally more encouraging. New-home sales posted three months of gains before declining in August. Housing starts for September were up 1.4% to the highest level in the previous six months, and were shadowed by an increase in building permits. The West region accounted for most of September's nationwide re- sales decline. The Midwest posted a slight drop, while the Northeast and South registered small gains. California, which often paces the gain or loss for the West as a whole, last month departed from the pattern by recording a 0.5% gain. The California Association of Realtors said the improvement came despite a backsliding economy and private sector layoffs. Lynn Reaser, senior economist at First Interstate Corp. in Los Angeles, said other areas in the West, which had showed strength in the last few years, have now softened. Sluggish Sales In Seattle She cited sluggish sales in the once- hot Seattle area, where job cutbacks at Boeing Co. have hurt the market, and in Phoenix, which also is seeing more work force reductions. The NAR said the median sales price of existing homes nationwide declined last month to $103,200, down 1.3% from August's $104,600. September's median price was still 2.9% above the price in the same month a year earlier. The West and Northeast continued to show the most weakness in terms of prices, with substantial falloffs in some cities. Los Angeles, for example, has registered a resale price decline of 8% in the last year to September's $206,600 median price tag, CAR said. Reaser said many homeowners are simply keeping their homes off the market because they are unwilling to accept such reductions in their selling price. September's lower resales were particularly disappointing because mortgage rates had fallen to 19-year lows, said First Boston's Alexy. Coupled with slow growth in home prices and declines in some areas, that should have been enough to boost sales, he said. Thirty-year fixed rate mortgages averaged 7.92% in September, the lowest monthly average since a 7.73% rate in June 1973. But rates have shot up in the last few weeks, reaching 8.23% during the week ended last Friday, according to the Federal Home Loan Mort- gage Corp. Rates Moving Up Rates have moved up in sympathy with long-term bond rates, which have been affected by traders' worries concerns over presidential candidate Bill Clinton's economic program and other concerns about the economy. Several other important indicators are due out this week, including initial gross domestic product numbers for the third quarter, to be released today#m#tues#m#, and new- home sales, scheduled for Friday. MMS' survey of economists shows they estimated 1.6% growth for third-quarter GDP. Econom- ists also are looking for a 3% increase in September new-home sales to a 590,000-unit rate. Alexy, reflecting many economists' belief, said new-home sales are a better gauge of economic ac- tivity than existing-home sales because they entail purchases of many goods and services that resales generally don't. By region, yesterday's report showed that resales in the West declined 5.6% to a 670,000-unit annual rate. The rate matched 1992's low, reached in January. The median price there was up 5.2%, to $145,200. Sales slipped 1.1% to an 870,000-unit rate in the Midwest, where the median price declined 1% to $81,300. But in the Northeast, sales rose 1.9% to a 530,000-unit rate. The median price there dropped 3.5% to $137,000. Sales in the South were up 0.8%, to a 1.21 million rate. The median price fell 3.7% to $91,700. This article is copyright 1992 Investors Business Daily. Redis- tribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM