New-Home Sales Shatter Record

Sales of new single-family homes rose 3.5% in December as 2002 turned out to be another record year for the homebuilding industry -- beating last year's record by 7.5%.New homes totaled 976,000 for all of 2002, compared with 908,000 in 2001, according to the U.S. Commerce Department. The department also reported that new-home sales rose from a seasonally adjusted annual rate of 1.045 million in November to 1.082 million in December -- the fifth consecutive month in which sales have exceeded the 1 million rate. The National Association of Home Builders is forecasting that sales of newly constructed homes will slow to 942,000 this year, even though sales ended the year at a record pace and inventories of unsold new homes are lean. The second-half surge in new-home sales was stimulated by low and falling interest rates. "This is largely a mortgage rate story," said NAHB economist Michael Carliner. He thinks mortgages rates have bottomed out and will be up to 6.5% by the fourth quarter. "It means we will still have very low interest rates, but we won’t have the incentive of falling rates," Mr. Carliner said. New-home prices, adjusted for quality, rose 4.6% in 2002 and the average price was 6.3% higher, the Commerce Department reported. The department can be found online at http://www.doc.gov.