Despite the consequences of September 11, sales of existing single-family homes set a record in 2001. Monthly sales slipped in December but remained very strong, according to the National Association of REALTORS.

There were a total of 5.25 million exiting home sales in 2001, up 2.7 percent from 5.11 million in 2000. The previous record was 5.21 million sales in 1999; NAR began tracking the existing-home sales series in 1968.

Existing-home sales eased 0.8 percent in December to a seasonally adjusted annual rate* of 5.19 million units from an upward-revised level of 5.23 million units in November. Last month's sales activity was 5.1 percent above the 4.94-million unit pace in December 2000.

David Lereah, NAR's chief economist, said low interest rates were a major factor throughout the year. "Although mortgage interest rates moved around a lot during 2001, they generally stayed within a range of a half of a percentage point. In fact, 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," he said.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 7.07 percent in December, up from 6.66 percent in November; it was 7.38 percent in December 2000. The average 30-year rate for all of 2001 was 6.97 percent, the lowest annual average next to 6.94 percent in 1998. "In the last couple weeks, mortgage interest have eased back into the high-six range, but we expect a gradual increase during the year as the economy improves," Lereah said. "The 30-year fixed-rate mortgage should average 7.3 percent in the second half of the year – still pretty good in historic terms."

NAR President Martin Edwards Jr. said first-time buyers might need to be a bit more flexible in 2002. "Although most people prefer fixed-rate loans, the spread between fixed- and adjustable-rate mortgages has increased. That's a pattern we expect to continue this year, meaning adjustable loans may be a better option for people that have difficulty qualifying for a fixed-rate mortgage," Edwards said. "In addition, potential first-time home buyers may want to consult a real estate professional to learn about loans available in their area that are designed for entry-level buyers, especially in the higher-cost markets."

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 median is the midpoint -- half the homes sell for less, while half sell for more. 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 explained.

Housing inventory levels fell 12.9 percent at the end of December with 1.82 million existing homes available for sale, which represents a 4.2-month supply at the current sales pace. There were 2.09 million homes available at the end of November, which was a 4.8-month supply. Regionally, homes in the Midwest were reselling at an annual rate of 1.18 million units in December, up 0.9 percent from November; they were 14.6 percent above December 2000. The median price in the Midwest was $129,200, up 6.7 percent from a year ago.

Published: January 25, 2002

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