WASHINGTON March sales of existing and new single-family homes surged and have economists saying this could very well be a banner year for the mortgage industry.
A Census Bureau report released Wednesday said sales of new homes rose 4.2%, to a one-month record of 1.02 million units. And the National Association of Realtors said Wednesday that sales of existing homes rose 4.8%, to 5.44 million units the second-highest one-month unit mark on record. Home inventory sales rose 2.6%, meaning 1.58 million existing homes were available for sale.
It is awfully hard to see what could be wrong with this picture, said Doug Duncan, chief economist for the Mortgage Bankers Association of America. All indications from the statistics issued Wednesday point to a continued robust market, he said.
Inventory is good and business activity is very strong, which will be good for mortgage bankers, Mr. Duncan said. There is still competition, so there will be no price bubbles emerging.
He attributed the surge to sustained short interest rates and builders and housing suppliers restraints on inventory buildup.
There is not a supply problem to work through, Mr. Duncan said. Its a very stable, strong market.
Fannie Mae chief economist David Berson called the sales figures significant surprises.
We and most other analysts expected the numbers to be strong, but not nearly as strong as they were, he said. He too credited the fact that mortgage rates are now close to the lowest levels in 30 years.
Mr. Duncan and Mr. Berson both said the home figures show that the economy is not in dire shape. It has slowed but is certainly not in recession now, Mr. Berson said. Most people still have jobs and income growth is relatively strong.
Mr. Duncan said housing will prevent the economy from tipping over into recession.
Noting that typical consumers still have more equity in their home than in the stock market, he said home equity gains are counterbalancing the stock markets swoon.
People are saying, Prices have gone up, and if I had to cash out I could do pretty well on my house, he said. This allows people to not worry whether their 401(k) plans are going up and down on a weekly basis.
Mr. Berson argued that, broadly defined, the housing industry can account for up to 20% of the nations economy. It has significant spillover, he said.
With this pickup in sales, he said, it certainly gives additional evidence that unless other parts of the economy fail, the economy is not going to slip into recession.
The numbers indicate that purchase originations are going to be strong at near-record levels, Mr. Berson said. The combination of solid origination rates and the refinance boom, he said, should add up to an incredibly strong first-quarter report for mortgage activity.
Freddie Mac chief economist Robert Van Order agreed. He said that, because home sales have been rising faster than new housing starts, housing production should remain strong, and consequently, so should mortgage originations.
Origination strength will help to offset turbulence that has resulted from loans being paid off because of the refinance boom, Mr. Van Order said.
It is a busy year, he said. The business of originating loans will be stronger, but the size of the mortgage market, the overall value of mortgages will rise sharply as well.
Mr. Duncan of the mortgage bankers group said that, while he does not expect the current sales pace to last all year, total origination volume for 2001 will be very close to the all-time high of $1.5 trillion set in 1998.
If interest rates hold where they are, at 6.5%, it will surpass the 98 mark, he said.