WASHINGTON -- U.S. sales of previously owned homes rose in November to their second-strongest rate ever, while consumer confidence hovers close to a record high, economic reports yesterday showed.
"For this time of year, it's an incredibly brisk market," said John Tuccillo, consulting economist for the National Association of Realtors.
Resales increased 2.7 percent last month to an annual rate of 4.90 million, close to the record pace of 4.91 million set in July, the Realtors' association said. Sales of existing homes are expected to set a third straight annual record this year, according to the association's forecast.
Fueling the rise in home purchases has been strong consumer confidence. The Conference Board's confidence index was little changed at 126.1 this month, compared with a November reading of 126.4. The index has stayed above 125 for 18 of the past 20 months and is high by historical standards. It set a three-decade high of 138.2 in June.
The housing market has been so strong that the supply of homes for sale is dwindling. Sales agents "are running out of inventory in a lot of places," Tuccillo said. "There's no want for buyers."
That's one reason why the inventory of previously owned homes fell in November to 4.7 months worth at the current sales rate, the lowest this year. Couple that with bulging order backlogs at the nation's homebuilders and home sales could start to slow early next year simply because there aren't enough houses to satisfy the flood of buyers.
"There are some yellow flags," said Richard Yamarone, a senior economist at Argus Research Corp. in New York. "Demand is exceeding supply. There's record backlogs and orders. And the inability of construction companies to hire skilled labor remains troublesome."
The median price of a previously owned home rose to $131,800 in November from $130,700 a month earlier. The median price is 6 percent higher than in November 1997. That's close to the 6.2 percent price increase for all of last year. At the same time, low interest rates are keeping down the cost of mortgage payments and that's prevented higher home prices from pushing up consumer price inflation.
Consumer optimism probably will keep spending strong -- with the economy on track to enter the ninth year of its current expansion in April. "As we enter 1999, the outlook for continued economic growth remains positive," said Lynn Franco, a Conference Board economist. A sign of that is holiday sales. At the nation's mall specialty stores, sales rose 5.3 percent from a year ago, according to the International Council of Shopping Centers.
The high degrees of confidence, combined with job and income gains and low mortgage rates, will underpin housing next year. Since the week of June 12, the average 30-year fixed mortgage rate stayed below 7 percent.
In November, the average weekly 30-year mortgage rate was 6.87 percent, little changed from October's average of 6.71 percent, according to weekly statistics from Freddie Mac, the No. 2 buyer of U.S. home mortgages.
Still, industry analysts aren't anticipating sales of previously owned homes will set a fourth annual record next year, because of forecasts of slower economic and employment growth.
The Realtors' association expects next year's home resales to total 4.48 million units, compared with an anticipated 4.78 million homes this year. Last year, 4.22 million existing homes were sold.
Analysts had forecast November sales at a 4.79 million rate. In November, sales of previously owned homes rose in three regions. In October, resales increased 1.7 percent to an annual rate of 4.77 million, previously reported at 4.79 million.
The real estate statistics, based on closing contracts, are considered an important gauge of growth because sales of previously owned homes account for about 85 percent of all U.S. homes on the market, and homebuyers are big consumers of furniture, appliances and other household goods.
Pub Date: 12/30/98