The new single-family home market had its best year in history in 1998 after a strong month in December, and a crucial economic indicator shows the ongoing economic expansion still has plenty of momentum.

The U.S. Census Bureau reported that sales of new single-family homes hit a a new high last year of 888,000, well over the previous high set in 1977 of 819,000, right as Baby Bomers were getting into the housing market. In December alone, sales came in at an annualized rate of 978,000, down 3.6 percent from November's all-time high of 1.015 million.

Meanwhile, the Index of the Leading Economic Indicators rose a solid 0.3 percent in December after climbing 0.5 percent in November, according to the Conference Board, a business research group.

Economists said they were impressed by an upward revision to the November new-home sales that ratcheted the total above the key one-million mark for the first time. Commerce had originally reported homes sales in that month totaled 965,000.

The median sales price of new houses sold in December 1998 was $151,300; the mean sales price was $182,200.

"We have been looking at strong sales for a while," said Fred Breimyer, chief economist at State Street Bank and Trust Co. in Boston. "Most of our indicators are telling us that people are still in the mood to buy."

Relative strength in the December figures was fueled by the Midwest, where home sales soared 18.1 percent from November. Sales were down elsewhere in the country. They fell 18.8 percent in the West, 7.5 percent in the Northeast and 0.5 percent in the South.

With houses in big demand, builders' inventories of available homes have been dwindling. The supply of available homes in December rose to 3.7 month's worth from 3.6 month's worth in November but was still at a very low level.

"This expansion shows no sign of ending," said Michael Boldin, director of Business Cycle Research at the Conference Board. "Now almost eight years in length, it is the second longest on record and we expect it to become the longest ever in early 2000."

The leading indicators gauge is intended to predict future economic activity. December's increase was the third in a row, reinforcing expectations for continued growth.

The latest data came as Federal Reserve officials were gathering for the first session of a two-day meeting to discuss interest rates. But the housing and leading indicator reports were not expected to sway the Fed much as analysts widely believe the central bank will keep interest rates steady.

The Fed cut interest rates three times late last year as it attempted to safeguard the economy from financial turmoil that has swept the globe. But after the economy surged at a remarkably strong 5.6 percent rate in the fourth quarter, few economists believe the Fed will trim rates again soon.

Published: February 3, 1999

Use of this article without permission is a violation of federal copyright laws.