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Sales of Existing Homes Decline

Real estate: June total is down 12% from May. But mortgage rates fall this week to 35-year low.

July 26, 2002|From Times Staff and Wire Reports

Sales of existing homes fell sharply in June, recording the biggest monthly decline in seven years. But mortgage rates dropped Thursday to their lowest level in 35 years, which could help bolster housing activity.

The existing-home sales decline of 12% was larger than expected, but the month's annualized sales pace of 5.07 million units still indicates a robust market, according to a report released Thursday by the National Assn. of Realtors.

The group said it expects activity to bounce back this summer, and predicts total sales this year will set a record.

In another housing report Thursday, the government said sales of new homes rose to a record pace in June, spurred by inexpensive mortgages and buyers looking for a more secure investment than stocks.

Sales of new single-family homes rose less than 1% to a yearly rate of more than 1 million, up from a revised 996,000 pace in May, the Commerce Department said. Led by a solid increase in the West last month, sales this year remain on track to establish a new record, analysts said.

"Housing is undeniably strong and will remain strong," said Carl Steen, an analyst at Maria Fiorini Ramirez Inc. in New York. "Interest rates are still low and enough people are employed" to keep the housing market robust.

New-home prices are nearly 2% higher than they were a year earlier, while the Dow Jones industrial average has declined 20% during the same period. Order backlogs have swelled at D.R. Horton Inc. and other major builders, suggesting that housing will keep propelling economic growth.

Meanwhile, mortgage giant Freddie Mac on Thursday said rates for the average 30-year fixed loan dropped to 6.34%, the lowest figure on record since the company began tracking rates weekly in 1971. Chief Economist Robert Van Order said rates were last at this level in May 1967.

The reduction may cause more homeowners to consider refinancing their loans. The Mortgage Bankers Assn. of America estimated that one-third of U.S. homeowners could be candidates for lower-rate mortgages.

Mortgage rates tend to track government bond yields, which have tumbled this year as more investors have fled stocks for bonds.

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