WASHINGTON -- The most affordable mortgage rates and lowest unemployment in three decades combined to push sales of existing single-family homes to a record 4.78 million in 1998.
That marked a 13.5 percent increase over 1997 and the third consecutive annual record, the National Association of Realtors said Monday. This year's residential real estate market should be good, but not that good, economists said.
"If 1998 was Mark McGwire hitting 70 home runs, what we will see in 1999 is 62 home runs -- something that would have been a record breaker, except for the previous year," said economist Robert Barr of Fannie Mae.
Last year's sales were propelled by an ideal combination of unemployment at a 29-year low of 4.5 percent; mortgage rates under 7 percent since June, the longest such stretch in three decades, and continued solid stock-market gains.
"You have a job and a low mortgage rate and a home that's affordable, you're going to buy it," said economist David Lereah of the Mortgage Bankers Association of America.
He forecast sales of about 4.6 million this year.
The strong sales, in turn, propelled a healthy increase in home prices. The median price of an existing home last year, meaning half sold for more and half for less, was $130,600, up 5.2 percent from 1997. By contrast, the increase in consumer prices -- 1.6 percent -- was less than a third of that.
By region, the median price rose 7.2 percent last year in both the Midwest, to $113,700, and the West, to $172,000; 5.9 percent in the South, to $115,400; and 3.2 percent in the Northeast, to $149,700.
Sales, by region, soared 18 percent to 1.85 million in the South, 13 percent to 1.20 million in the Midwest, 11 percent to 1.04 million in the West and 8 percent to 684,000 in the Northeast.
In December alone, sales rose 3.1 percent from November to a seasonally adjusted annual rate of 5.03 million, also a record going back to when the Realtors first began tracking sales in 1968. Mild weather gave sales an added boost during the month.
The demand pushed the inventory of homes for sale, 1.58 million, to a record low level -- a 3.8-month supply at the December sales rate.
Separately, the Treasury Department said the budget deficit in December totaled $5.4 billion, compared with a $13.6 billion surplus a year earlier. The department noted that because Jan. 3 fell over the weekend, Social Security payments for January went out on Dec. 31 and that in turn boosted spending for the month to a record $184 billion.