Bright spot: Home sales
With mortgage rates down, sales continue to climb
Much of the national economic news is bad, but the housing market presents a predominantly positive picture.
Mortgage rates are low, and demand for housing is strong. In a report last week, average national rates for 30-year fixed-rate mortgages were reported at 6.34 percent, compared with 7.03 percent a year ago. For 15-year mortgages, favored by some who are refinancing their homes, the rate was 6 percent.
The demand for real estate also is bolstered by the public's concerns about a volatile stock market. Sharp declines in stock prices have encouraged investors to look for other opportunities, and real estate appears to offer more return and less risk.
That view was expressed in a recent New York Times article as follows: "Many people are able to remain sanguine about the market's drop because their homes are worth far more than their market investments. A typical middle-class family has about 60 percent of its wealth tied up in its house and about 20 percent in pensions, 401(k) plans and other stocks, according to Edward Wolff, an economist at New York University."
National forecasts call for combined sales of 6.4 million new and existing homes this year, compared to 6.21 million in 2001.
The Rochester area housing market also has been strong. Dan Wagner, president of the Southeast Minnesota Association of Realtors, said that house sales throughout the region served by his organization totaled 2,682 for the first seven months of the year, up 120 from last year. The region covers southeast Minnesota from Winona to Owatonna. Sales in Rochester also were strong at 1,212, just 28 less than last year.
Wagner said that the average home sale price in Rochester was $168,526 this year through July, compared with $156,624 last year, an increase of 7.6 percent. The average interest rate for 30-year fixed mortgages is 6.5 percent, comparable with the national figure.
Wagner said that customers have told him that they have taken substantial funds out of the stock market and invested them in housing.
The downturn in the national economy has a number of complex causes that make it difficult to analyze. They include the widespread reports of accounting irregularities by major corporations, which have led some people to shun investment. They also include the continued effects of the Sept. 11 terrorist attacks and the threat of other attacks that could be even more devastating.
Consumer spending, which represents two-thirds of the U.S. economy, has remained reasonably strong until recently. That fact and the robust housing market offer some hope that Americans can make ends meet until the economy picks up again.
It is easy to succumb to the gloomy reports from Wall Street, but it is necessary to remember that the stock market does not represent the whole economy.