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News > Economy
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New home sales surge
graphic January 28, 2002: 11:14 a.m. ET

Low mortgage rates spurred record sales last year; economic bright spot.
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  • Existing home sales fall - Jan. 25, 2002
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  • Commerce Department
  • CNN/Money economic calendar
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    NEW YORK (CNN/Money) - New home sales rose in the United States in December, the government said Monday, beating expectations and ending a record year in which the sector was one of the lone areas of strength in an economic recession.

    Sales of new homes rose 5.7 percent to an annualized rate of 946,000 units in December from a revised 895,000 unit pace in November, the Commerce Department reported. Economists surveyed by Briefing.com expected a pace of 925,000 units.

    For the year, new home sales rose to a record 900,000 units from 877,000 in 2000, the department said.

    On Wall Street, stock prices showed little reaction to the data, posting moderate gains in late morning trading, while Treasury bond prices fell.

    The news follows last week's report by the National Association of Realtors that sales of existing homes also set a record in 2001, though the pace of sales of those homes dropped in December.

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    Low mortgage rates lifted home sales throughout 2001, helping the housing market ignore what some economists say is the first recession in the U.S. economy in a decade. Government-sponsored mortgage lender Freddie Mac (FRE: down $0.55 to $66.55, Research, Estimates) said the national average mortgage rate was 6.97 percent in 2001, the second-lowest rate since it started keeping records in 1971.

    A hot market led to higher home prices, improving homeowners' balance sheets and encouraging consumer spending. The median home sales price rose 4.5 percent to $170,200 in December. For the entire year, the median sales price rose 3 percent to $174,100.

    Click here for CNN/Money's economic calendar

    Consumer spending fuels two-thirds of the U.S. economy and is closely watched by policy makers at the Federal Reserve.

    To help soothe the impact of a recession that likely began in March, according to the National Bureau of Economic research, the Fed cut rates 11 times in 2001.

    The central bank's policy makers are set to meet again on Tuesday and Wednesday, but they are expected to leave rates alone, as recent data have pointed to an imminent recovery. graphic

      RELATED STORIES

    Existing home sales fall - Jan. 25, 2002
      RELATED LINKS

    Commerce Department

    CNN/Money economic calendar




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