Sales of existing homes make surprise gain

WASHINGTON — Sales of existing homes had fallen for five straight months before an unexpected increase in February, helped by unusually warm weather. But slack demand in some formally red-hot housing markets produced what one analyst called a "tale of two cities."

The National Association of Realtors reported Thursday that sales of existing single-family homes rose by 5.2 percent last month to a seasonally adjusted annual rate of 6.91 million units.

The biggest increase in two years took economists by surprise. They had expected a drop of about 1 percent after five months of declines.

One of the economy's standout performers over the past five years, housing has been slowing in recent months.

Analysts cautioned against reading too much into the February increase, saying it primarily reflected an unusually mild winter, which boosted buyer traffic.

David Lereah, the Realtors' chief economist, said there has been a real split in performance in recent months, with many previously hot markets suffering declines as rising mortgage rates make higher-priced homes less affordable.

Mortgage giant Freddie Mac reported Thursday that rates on 30-year mortgages, which had jumped to the highest level in 2 1/2 years, edged down this week to an average of 6.32 percent.

Lereah said sales were down by double-digits in such previously sizzling sales markets as Phoenix, Fort Lauderdale, Fla., and San Diego.

By contrast, he said some medium-priced markets were posting strong sales gains, citing Indianapolis, Albuquerque and Houston as examples of double-digit gains.

"This is a report of a tale of two cities," he said. Lereah said higher interest rates were "tapping the brakes, notably in higher-cost housing markets."

Nationwide, the median sales price for an existing home — the point where half the homes sold for more and half for less — rose to $209,000 in February, an increase of 10.6 percent from February 2005.

That sales price was 5 percent below the all-time high of $220,000 set in August and compared with a median of $210,000 in January.

Many economists believe that price appreciation will slow from double-digit increases to gains of about 5 percent this year with sales declining by about 5 percent after five record years in a row.

If that forecast comes true, then the housing boom of recent years will slow to a more sustainable pace.