Despite terrorist attacks, recession, rising unemployment, and hard times on Wall Street, residential real estate did well in 2001.

According to the National Association of Realtors, 5.20 million homes were expected to be sold in 2001. The record? 5.21 million in 1999.

And this year, says NAR, should be a repeat of 2001.

NAR also says that the national median existing-home price for 2001 was $146,600, an increase of 5.5 percent over the year 2000.

Not only were existing home sales strong, new home construction was also at peak levels.

New home production in 2001 is expected to reach 888,000 -- an increase of about 11,000 units over 2000, according to the National Association of Home Builders.

NAHB also says that last August the typical new home sold for $201,500 -- up from $200,400 in August, 2000. However, the NAHB figures also show higher prices during 2001 including $207,00 in July, $211,400 in May, and $211,000 in February.

Why has real estate done so well during the past year?

One reason, surely, concerns interest rates. Despite an interest level increase toward the end of 2001, for much of the year mortgage rates were remarkably attractive -- and even current rates look good when compared with rates seen in recent years.

The Federal Reserve lowered short-term interest rates 11 times during 2001. Such reductions impacted adjustable-rate mortgages (ARMs), but had far less effect on long-term fixed rate loans.

As an example, many ARMs use the 11th District Cost of Funds Index (COFI) as an index. This measure reflects mortgage money costs paid by S&Ls in Arizona, California, and Nevada. The 11th COFI index was down to 3.628 percent in late 2001 -- the lowest rate seen in 20 years.

Interest levels for fixed-rate loans have also declined, in part because investors have moved money from Wall Street to bonds and long-term securities -- financial instruments which are often major sources of mortgage financing.

Lower interest rates in 2001 meant that more people could enter the marketplace as buyers and that many buyers could afford homes with higher prices. The larger pool of potential buyers created by lower rates helped sellers maintain pricing levels. In addition, reduced rates allowed existing owners to refinance and cut monthly mortgage costs -- thus freeing more spendable dollars to power our consumer economy.

What will happen in 2002? Two points stand out:

First, each year a given number of people become first-time homebuyers and a certain number of existing homeowners move. This means that regardless of interest rates and general economics, there's always a housing market of some size.