After five short-term interest rate cuts in as many months, a sense of optimism had returned to the national Fed-obsessed marketplace. But hopes for a quick economic recovery are fading, smothered by rising unemployment rates and the slide of the one economic indicator that had held up until now - housing. Still, the reports aren't as bad as they seem, insists the National Association of Realtors.

For two weeks in a row, first-time jobless claims were up, reaching their highest levels since April 28th, says the Labor Department which revised its earlier report that claims were slowing. Alarming economists were two points - the numbers had risen and risen sharply. White House economic adviser Glenn Hubbard told Congress' Joint Economic Committee last week, "The recent level of initial claims for unemployment insurance suggests that the unemployment rate will likely continue to rise over the next several months.''

The U.S. unemployment rate is now at 4.5 percent, and is expected to rise to 4.6 percent in May.

Since it is employment that most affects housing starts and sales, it was only inevitable that housing numbers would start to come down.

Both the National Association of Home Builders (NAHB) and the National Association of Realtors (NAR) have announced slowdowns, suggesting that the housing market is flattening. Yet, association leaders remain optimistic due to continuing low mortgage interest rates.

According to the Commerce Department, sales of new single-family homes declined 9.5 percent in April to a seasonally adjusted annual rate of 894,000 units. Yet, says Bruce Smith, president of the NAHB, "An 894,000-unit sales rate is still quite healthy on an historic basis, and is actually higher than the average sales rate for any of the last three years.

"Low interest rates on long-term mortgages, which NAHB projects will remain in the low 7 percent range throughout this year, are helping keep buyer demand firm," continues Smith, "But weakening of the general economy, as evidenced by lower consumer confidence and sliding job markets, will eventually have a negative impact."

The NAHB is forecasting a moderate decline in new home sales through the end of 2001, but because the volume of activity has been so strong in the year to date, the expectation is for a modest gain for the year as a whole compared to 2000.

"Sales of new homes could hit a record this year," Smith said.

On Friday, the NAR announced that sales of existing single-family homes declined 4.2 percent in April to a seasonally adjusted annual rate* of 5.20 million units from a level of 5.43 million units in March. Last month’s sales activity remained 4.4 percent above the 4.98-million unit pace in April 2000.

Dr. David Lereah, NAR’s chief economist, said, "Existing-home sales are coming off of the second-highest month on record, and remain above forecast levels. The recent surge of activity results partly from a bottoming-out of mortgage interest rates during the first quarter, and even if sales moderate in the months ahead we’re still expecting total sales this year to be the second-highest on record."

Concerning the dip, Lereah said, "Last month’s drop may not be a yellow flag, but it could be a concern that housing activity has topped out. Every time the Fed has cut short-term rates, long term interest rates have not declined – so they need to continue their accommodative policy."

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 7.08 percent in April, up from 6.95 percent in March. Last year in April, the mortgage interest rate was 8.15 percent.

All eyes will be on mortgage interest rates, but NAR President Richard A. Mendenhall warns that mortgage interest rates aren't the only indicator.

"Other factors contributing to high home sales include strong household formation and relatively low unemployment – most people have good jobs and remain confident in their own future," he said.

Published: May 30, 2001

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.