Higher mortgage rates, normally poison to home sales, have hardly dented homebuying this year. Economists say resales will set a record by yearend even if a slowing economy finally cools things down.
Experts say a lucky mix of circumstances explains the seeming paradox of record sales in the face of rates about half a percentage point higher than a year ago. The key factors:
*Consumers have been willing to ignore higher rates because jobs are plentiful.
*Families have more equity in their homes, enabling them to trade up, because home values have been rising especially fast.
*Inexpensive adjustable-rate mortgages have blunted the effect of rising fixed rates.
"This economy has been generating millions and millions of jobs for the past six years," creating "a pool of people who are ready to buy a home," said David Lereah, chief economist at the Mortgage Bankers Association.
"In hindsight, it's obvious that interest rates never got high enough" to crimp home sales, Mr. Lereah said. Even with the recent increases, rates are hovering around 8% - about a point higher than the 24-year low set two years ago.
Resales, he said, are poised to cross the four-million mark this year; the record of 3.99 million resales was set in 1978.
For those who prefer a cheaper deal, the plethora of variable- rate mortgages also has made it easier to buy a home.
Homebuyers aren't just taking out the standard variable-rate mortgages that move up or down every 3, 6, or 12 months. Increasingly, they are using hybrid mortgages, which act like fixed-rate loans for 3, 5, or even 7 years, before adjusting to match prevailing interest rates .
Another plus is that consumers are not put off by more-expensive, fixed- rate loans, or even adjustable-rate models, because many are veteran refinancers, said Eileen Neely, senior economist at the Federal National Mortgage Association, known as Fannie Mae.
"The cost of refinancing has dropped extremely," Ms. Neely noted.
"If rates go up, you're in a good rate. If rates go down, you can refinance. That has made the housing sector a lot less interest rate sensitive than even five years ago," she said.
The resurgence of California's housing market, which accounts for 10% to 15% of overall sales, has been another key ingredient in this year's extraordinary sales, said Mark Zandi, chief economist at Regional Financial Associates, West Chester, Pa.
Existing-home sales in California are expected to be 16% higher in 1996 than last year and to reach almost 494,000 units, said the California Association of Realtors. Average home prices, though still falling, are more stable than at any other time in this decade, and they are projected to drop only 1.1% this year over 1995.
Stronger home prices have bolstered home resales all over the country this year, said Ms. Neely.
Earlier in the economic recovery, "people who were willing to trade up couldn't afford to, because their houses hadn't appreciated enough," Ms. Neely said. Now, many homeowners have the extra equity they need to move up to a more expensive home, she said.
Existing-home prices had already risen 8% by August - the latest month for which figures are available - from 1995, said the National Association of Realtors. That's about as much as prices rose from 1993 to the beginning of this year.
Economists have been playing catch-up with the housing market all year, and they are finally hoping they've got it right.
Fannie Mae, for example, forecast in January that 3.77 million units would be resold this year. Last week, the mortgage agency revised its resale forecast to 4.11 million units.
Fannie Mae's January forecast for new home sales this year was 665,000. That estimate now stands at 746,000.