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Record Year For Home Sales

Spurred by low mortgage rates, Americans pushed sales of new homes up by 5.7 percent in December. That helped to make 2001 the best year on record for home sales, even as the country suffered through a recession.

A record 900,000 new single-family homes were sold last year, surpassing the record of 886,000 set in 1998, the Commerce Department reported Monday.

The National Association of Realtors reported Friday that 5.25 million existing homes were sold in 2001, also an all-time high.

The country slid into recession in March and was dealt another blow by the Sept. 11 terror attacks. But the housing market, one of the economy's few bright spots, managed to hold up so well because of low mortgage rates, analysts say.

The average rate for a 30-year fixed-rate mortgage in 2001 was 6.97 percent, the lowest annual average rate since 1998.

Should the economy rebound this year as many economists predict, mortgage rates are also expected to rise.

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For Americans who opted to buy a home last year, the benefit of low mortgage rates outweighed other negative factors, including rising unemployment, which hit a six-year high of 5.8 percent in December, and a volatile stock market, analysts said.

Appreciation in housing values and the resulting cash from a wave of home-mortgage refinancing has helped support consumer spending during the slowdown, Federal Reserve Chairman Alan Greenspan said last week. Consumer spending accounts for two-thirds of all economic activity.

To revive the economy, the Federal Reserve cut short-term interest rates 11 times last year, which had the effect of pushing down the prime interest rate — a benchmark for millions of consumer and business loans — to its lowest level since November 1965.

Many economists expect the Fed will hold rates steady at its meeting this week, especilly since Greenspan last week told Congress that he see signs of a rebound.

The 5.7 percent increase in December pushed new-home sales to a seasonally adjusted annual rate of 946,000. The number surpassed a preidction of 925,000 units in a Reuters survey.

The stock market largely shrugged off the news, but Wall Street has a barrage of economic data to deal with this week, including the government's report on fourth-quarter gross domestic product and the monthly U.S. payrolls report due late in the week.

The rise in sales pushed up home prices. The median home sales price, meaning half sold for more and half for less, rose to $170,200 in December, up 4.5 percent from the month before.

For all of 2001, the median sales price increased to $174,100, a 3 percent advance from 2000.

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