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U.S. home sales dip
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January 25, 2002: 12:35 p.m. ET
Existing home sales fall in December but still set record for all of 2001.
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NEW YORK (CNN/Money) - Sales of existing homes in the United States fell in December, a real estate group said Friday, as a long-standing pillar of strength in an economy in recession finally began to cool off at the end of last year.
But sales of existing homes for all of 2001 still hit a record high, the National Association of Realtors said.
Existing home sales fell 0.8 percent to an annual rate of 5.19 million units in December, the group said. Economists surveyed by Briefing.com expected sales at a rate of 5.18 million units.
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CNNfn's Deborah Marchini takes a closer look at existing home sales.
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The 5.25 million existing homes sold last year were the highest on record, the group said, and the market was supported all year by low mortgage rates.
"Last year was the second lowest year on record since Freddie Mac started tracking mortgage interest rates in 1971, and that is one of the fundamental factors in the favorable market conditions that we expect to prevail for this year as well," NAR chief economist David Lereah said in a statement.
The national average mortgage rate was 6.97 percent in 2001, according to government-sponsored mortgage lender Freddie Mac (FRE: Research, Estimates). NAR's Lereah said he expected mortgage rates to rise in 2002 as the economy recovers, averaging about 7.3 percent for the year, but that's "still pretty good in historic terms."
Wall Street had little reaction to the housing report, with stock prices mixed in early trading. Bond prices were lower, continuing a sell-off triggered when Federal Reserve Chairman Alan Greenspan made optimistic comments Thursday about the economy, dampening hopes for another interest-rate cut.
Click here for CNN/Money's economic calendar
The national median existing-home price was $151,400 in December, up 8.4 percent from December 2000, when the median price was $139,700, the NAR said. For all of 2001, the median price was $147,500, up 6.1 percent from $139,000 in 2000.
"Home prices rose a little more than expected in 2001, primarily due to tight housing inventories in many markets," Lereah said.
The strong housing market has helped keep consumer spending relatively stable despite the Sept. 11 terrorist attacks and a recession that some economists think began in March. Consumer spending fuels two-thirds of the world's largest economy, and when consumers' homes are worth more money, their balance sheets - and spirits - are lifted.
Meanwhile, the Federal Reserve, in an effort to support consumer spending and keep the economy from slowing further, cut short-term interest rates 11 times in 2001 to levels not seen in 40 years.
The Fed's policy makers are to meet again next week, but most economists think the central bankers will leave rates alone. In addition to recent data pointing to stabilization in manufacturing, consumer spending and the labor market, Greenspan's remarks encouraged the belief that the economy would pull out of its slump soon.
"We believe [Thursday's] remarks were enough to think that the Fed will take a 'wait and see' attitude rather than ease one last time," Merrill Lynch chief economist Bruce Steinberg said Thursday. 
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