Newspaper article THE JOURNAL RECORD

Lower Mortgage Rates Lead to Second-Highest Level of Home Sales in `01

Newspaper article THE JOURNAL RECORD

Lower Mortgage Rates Lead to Second-Highest Level of Home Sales in `01

Article excerpt

WASHINGTON (AP) -- Lured by low mortgage rates, Americans snapped up used homes in May, pushing sales to their second-highest level this year.

Sales of previously occupied homes rose by 2.9 percent in May to a seasonally adjusted annual rate of 5.37 million, after declining by 3.9 percent in April, the National Association of Realtors reported Monday.

Given that many economists were predicting sales would be flat or fall last month, the better-than-expected performance left analysts marveling at the industry's resilience in the face of the economic slowdown that has gripped the country since the second half of last year.

The main reason the housing market has remained stable during the slowdown is because mortgage rates have stayed low. Though rates crept up in May from April, they are down more than a full percentage point from May 2000.

"The unsinkable housing market continues to prop up the economy," said economist Joel Naroff of Naroff Economic Advisors.

For this year, the 5.37-million rate was second only to the pace of 5.43 million posted in March.

The choppy economy isn't putting off home buyers for a number of reasons, economists said. Mortgage rates remain favorable and Americans -- despite mounting layoffs -- still have jobs, a key ingredient when deciding whether or not to make a big-ticket purchase, analysts said.

"Demand is still very high, interest rates remain close to historic lows and many people are confident about their own economic future," said David Lereah, the association's chief economist.

The average rate on a 30-year fixed-rate mortgage in May was 7.15 percent, up from 7.08 percent in April, but well below the 8.52 percent posted in May 2000. Mortgage rates hit a five-year high of 8.64 percent in mid-May a year ago. Last week, 30-year mortgage rates dipped to 7. …

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