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Existing home sales dip
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October 25, 1999: 2:31 p.m. ET
Rising interest rates cited for 2.1% drop in September to 5.13M annual rate
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NEW YORK (CNNfn) - Sales of existing homes across the U.S. declined for a third consecutive month in September, a real estate group said Monday, as rising mortgage rates made borrowing more expensive for potential homeowners.
Sales of existing homes fell 2.1 percent last month to an annual rate of 5.13 million, the National Association of Realtors said, slightly weaker than analysts' forecasts for a sales rate of 5.16 million units. The three-month decline was the first of its kind in more than six years. From a year earlier, sales rose 3.4 percent.
Rising mortgage rates -- a reflection of two Federal Reserve interest rate rises since June and rising yields on government bonds -- were the main culprit behind the slowdown, analysts said. Even so, few deemed the declining numbers as a sign that the long-running U.S. housing boom is coming to an end.
"The U.S. housing market appears to be gradually losing steam under the weight of higher mortgage rates," said Sherry Cooper, chief economist of Toronto-based brokerage Nesbitt Burns Inc. "Even so, the market remains exceptionally healthy by any yardstick."
Rising rates
According to Freddie Mac, the second-biggest mortgage agency in the U.S., the monthly average commitment rate for a 30-year fixed-rate mortgage in September was 7.82 percent, down slightly from 7.94 percent in August but up sharply from 6.72 percent in September 1998.
Those rising mortgage rates have coincided with rising yields in the U.S. Treasury market. The yield on the benchmark 30-year Treasury bond Monday rose to 6.39 percent -- its highest in two years.
Higher bond yields typically prompt banks and other lenders to raise mortgage rates to keep the gap between what it costs them to borrow from financial markets and what they receive in mortgage interest from home owners profitable.
Nonetheless, existing home sales have remained near the five-million mark for 11 consecutive months, suggesting consumers' appetite for property is not waning, said NAR chief economist James Smith.
Strong demand
"Consumer demand for existing homes is still healthy, despite several months of increased interest rates," Smith said. "The housing market will not be derailed because economic factors that drive consumer confidence -- employment, inflation and household wealth -- are at healthy levels."
What's more, the NAR predicts 30-year fixed mortgage rates will dip in the fourth quarter and average 6.7 percent next year, enticing more buyers to step forward and take advantage of what are still historically low borrowing costs, Smith said.
Regionally, the biggest drop came in the Northeast, with resales declining 15.5 percent to a 600,000-unit pace. Sales in the Midwest dropped 5.1 percent to an annual 1.12 million unit pace, while sales in the South declined 2 percent to a 1.99 million unit pace. Sales in the West bucked the trend, rising 8.3 percent to an annual pace of 1.43 million units.
The national median existing-home price was $134,500 in September, up 3.9 percent from the year-earlier month. At the end of September, there were 1.98 million existing homes available for sale, a 4.8-month supply at the current sales pace.
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