Homes set record sales pace

WASHINGTON – Existing homes were sold at the fastest pace in history last month, and the median price set a record as well. But some private economists predicted housing may be nearing its peak as mortgage rates begin to rise.

In June, existing homes sold at an annual rate of 7.33 million units, an all-time high and an increase of 2.7 percent from the seasonally adjusted sales pace in May, according to a report Monday from the National Association of Realtors.

The gain reflected a 2.4 percent rise in sales of single-family homes, which climbed to a record of 6.37 million units at an annual rate. Sales of condominiums also set a record, rising by 4.5 percent from the May level to an annual rate of 966,000 units in June.

The strength in sales helped push the median price of an existing home to a record $219,000, a gain of 14.7 percent from the median, or midpoint, for homes sold a year ago. That was the biggest jump in prices in nearly 25 years, since a 15.6 percent year-over-year increase in November 1980.

Gains in prices of that magnitude have spurred concerns that housing markets in parts of the country may be in the grips of what Federal Reserve Chairman Alan Greenspan last week called a “speculative fervor” that is pushing home prices to unsustainable levels similar to the boom in stock prices in the late 1990s.

“Just when you think sales activity is ready to settle into a more sustainable pace, the housing market continues to surprise,” said David Lereah, the Realtors’ chief economist.

Lereah said the boom in housing is being driven by mortgage rates which, defying expectations, have remained near rock-bottom levels this year even as the Federal Reserve has continued to raise short-term interest rates.

But other analysts noted that mortgage rates, as measured by Freddie Mac’s nationwide survey, have risen for three straight weeks and now stand at 5.73 percent for a 30-year mortgage, a development they expect will start to dampen both demand and prices.

“We are not looking for a burst bubble nationally, but we do expect things to slow down,” said Beth Ann Bovino, an economist at Standard & Poor’s in New York.

On Wall Street, the Dow Jones industrial average fell 54.70 points on Monday to close at 10,596.48.

The record sales pace in June came as a surprise as analysts had forecast that sales would be unchanged following a small 0.6 percent decline in May after existing home sales had hit their previous record of 7.18 million units in April.