The market for existing single-family homes experienced rising activity last month as home buyers responded to lower mortgage interest rates, according to the National Association of Realtors®.

Existing-home sales increased 1.9 percent to a seasonally adjusted annual rate* of 5.40 million units in September from an upwardly revised pace of 5.30 million units in August. Last month's sales activity was 7.8 percent above the 5.01-million unit pace in September 2001.

David Lereah, NAR's chief economist, said a prolonged slide in mortgage interest rates culminated in rising sales activity. "Mortgage interest rates have been on a steady slide since April and reached new historic lows in September, contributing significantly to higher existing-home sales," he said. "The lower cost of mortgages has increased housing opportunities and means monthly mortgage costs often are very attractive in comparison with rents." NAR projects existing-home sales will reach a record of 5.47 million this year, an increase of 3.2 percent from 2001.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.09 percent in September, down from 6.29 percent in August; it was 6.82 percent in September 2001. Last month was the lowest mortgage interest rate since the Freddie Mac series began in 1971.

NAR President Martin Edwards Jr. said the housing sector is proving to be resilient to negative news. "Even in a period of economic uncertainty, buyers continue to invest in the American dream of homeownership," he said. "Having a piece of the pie, along with steady returns over time, is making a great deal of sense these days to more and more home buyers." Edwards is a partner in Colliers Wilkinson & Snowden Inc., Memphis, Tenn.

Housing inventory levels at the end of September rose 4.9 percent from August to a total of 2.35 million existing homes available for sale, which represents a 5.2-month supply at the current sales pace.

The national median existing-home price was $159,000 in September, up 7.9 percent from September 2001 when the median price was $147,400. The median is the midpoint, which is a typical market price where half of the homes sold for more and half sold for less.

Lereah said the September price is below August, but notes this is a normal seasonal occurrence. "Every year since record keeping began, the median price has dropped in the fall because there is a higher ratio of singles and childless couples, often first-time buyers, who are generally purchasing more moderately priced homes. Families with children, who buy more expensive homes, typically move by the end of summer to be in that house by the start of the school year," he said. "Sometimes, analysts not familiar with the housing market read that seasonal decline as a negative indicator, but the only valid comparisons for median-home prices are with the same period a year earlier." Regionally, existing homes in the Midwest were selling at an annual rate of 1.22 million units in September, up 8.9 percent from August; the pace also was 8.9 percent above September 2001. The median price in the Midwest was $139,300, up 7.2 percent from September 2001.

The existing-home sales pace in the South rose 2.3 percent in September to an annual rate of 2.18 million units, and was 10.1 percent above September 2001. The median price of an existing home in the South was $148,700, which was 9.5 percent higher than a year ago.

Existing-home sales in the Northeast slipped 1.6 percent in September to a pace of 620,000 units; however, the sales rate was 5.1 percent above September 2001. The median existing-home price in the Northeast was $164,000, up 14.7 percent from a year ago.

Home resales in the West dropped 3.5 percent in September to an annual rate of 1.37 million units, but were 3.0 percent above September 2001. The median existing-home price in the West was $214,300, up 6.8 percent from the same month a year earlier.

Published: October 25, 2002

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