Existing home sales remain strong

/ Source: The Associated Press

Sales of previously owned homes held steady in September at the second-highest level on record as demand was bolstered by hurricane refugees, a real estate trade group said Tuesday.

The National Association of Realtors said sales of existing homes last month were unchanged at a seasonally adjusted annual rate of 7.28 million, the same as August. The Realtors said sales would have fallen without the increased demand for houses because of the devastation from Hurricane Katrina.

The September performance was stronger than economists had been forecasting. They had expected sales to decline by 1.2 percent, reflecting a belief that rising mortgage rates will begin to cool off the booming housing market.

The median price of an existing home stood at $212,000 in September, up by 13.4 percent from September 2004. That was a slight slowing from the 15.6 percent price appreciation recorded in August from the same period a year ago.

Economists are predicting that rising mortgage rates will slow the pace of sales and the rate of price appreciation in coming months. Rates for 30-year mortgage are now above 6 percent for the first time since last March.

Katrina had a major impact on sales in areas where it hit, the Realtors said. Sales plunged by 85 percent in New Orleans compared to September 2004 but were up 150 percent in nearby Baton Rouge.

“The nearby regions picked up a great deal of activity very quickly,” said David Lereah, chief economist for the Realtors.

The quick boost in demand was led by large companies who needed to relocate from the devastated areas buying homes in bulk to make sure their employees had places to live, Lereah said.

The increased demand pushed up prices in areas such as Baton Rouge, which saw prices rise by 31.9 percent from September 2004.

In Mobile, Ala., the Realtors said that sales were up 75 percent from a year ago and prices rose by 15.3 percent. Sales were up 58 percent in San Antonio while prices rose by 13.1 percent, compared to September 2004.

Lereah said that on balance Katrina lifted sales nationally from where they would have been had the hurricane not struck.

By region of the country, sales were up the most in the South — which bore the brunt of Katrina — for a gain of 3.7 percent.

Sales also rose by a smaller 0.8 percent in the Northeast but fell by 3 percent in the Midwest and 4.1 percent in the West.

For the year as a whole, Lereah said he had revised his forecast for total sales up slightly to 7.10 million units, which would mark the fifth straight year of record sales.

However, for 2006, Lereah said he was now forecasting that sales would edge down slightly to 6.86 million units, reflecting the impact of rising mortgage rates.

Lereah said that the small decline he is forecasting would represent a moderation from the red-hot sales pace of recent years. But he said he was not expecting any type of crash in home sales that would send prices plummeting.

“I see no hot markets where balloons are ready to burst, but certainly some air is coming out of those balloons,” Lereah said.