Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, December 30, 1993 TAG: 9312300071
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
Sales of existing homes in November jumped 2.9 percent, to a seasonally adjusted annual rate of 4.21 million, the National Association of Realtors said Wednesday.
And the Commerce Department's Index of Leading Indicators rose 0.5 percent last month, the fourth consecutive gain. Three straight moves in any one direction are considered a good, but not foolproof, signal of economic activity six to nine months in advance.
The level of home sales broke the old monthly record of 4.15 million in November 1978. It was the seventh increase in eight months. Every region except the West participated in the gain.
The economy is finishing 1993 with strength after a weak start. While economists anticipate some retrenchment in the first quarter, most expect healthy growth overall next year.
"There is no hint that things will fall out of bed," said economist Samuel D. Kahan of Fuji Securities Inc. in Chicago. "The worst that will happen is things will moderate. If current trends continue, things will be very strong."
The gross domestic product - the value of goods and services produced in the United States - advanced in the first quarter of 1993 at an anemic 0.8 percent annual rate.
It has improved in each quarter since. Kahan and other analysts think it will top 4 percent in the fourth quarter but pull back to 3 percent or less next quarter.
Low interest rates are fueling consumer buying of homes, and that spurs sales of furniture, appliances and other home-related goods. Increased home sales, in turn, cause home values to appreciate, which helps give home owners the confidence they need to borrow for other items, such as autos.
"People are seeing their home prices going up at a modest pace, and they feel good about that," said economist Sung Won Sohn of Norwest Corp.
The Realtors said the median price of an existing home in November - meaning half sold for more and half sold for less - was $106,800, up 4 percent from last year.
Sohn said many buyers acted on the belief that mortgage rates wouldn't get any better and could get worse. The sales advance came as rates reported by the Federal Home Loan Mortgage Corp. on 30-year mortgages edged up from a 25-year low of 6.83 percent in October to 7.16 percent in November.
"The uptick seems to have tipped many buyers off the fence of indecision and into the housing market," said Bob H. Elrod, president of the realty organization.
In November, eight of the 11 forward-looking indicators contributed to the upturn in the leading index.
In order of their impact, from largest to smallest, they were:
A decline in applications for unemployment benefits.
An increase in orders and contracts for new commercial buildings and business equipment.
A rise in prices of raw materials.
A gain in building permits.
An increase in the inflation-adjusted backlog of orders at factories for durable goods.
An advance in the average work week of factory employees.
Growth in the inflation-adjusted money supply.
An uptick in new orders for consumer goods.
Three indicators were negative. Starting with the worst, they were:
A slight decline in consumers' expectations, which was reversed in December.
Slowdown in business delivery times.
A dip in stock prices.
The various changes left the index at a seasonally adjusted 99.6, up 1.4 percentage point from a year ago and 1.2 percentage point from three months ago.
by CNB