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U.S. home sales strong
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June 25, 2001: 11:13 a.m. ET
Existing home sales in May surge past Wall Street expectations
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NEW YORK (CNNfn) - Sales of existing homes rose in the United States last month, a real estate group said Monday, a sign of ongoing strength in a bright spot for the otherwise sluggish U.S. economy.
Existing home sales rose 2.9 percent to an annual rate of about 5.37 million last month, the National Association of Realtors (NAR) reported, compared with a rate of 5.2 million in April. The rate was 3.5 percent above May 2000. Analysts surveyed by Briefing.com expected existing home sales to stay at 5.2 million.
Low mortgage rates have helped keep sales of existing and new homes relatively brisk, despite a slowdown in the U.S. economy that has eroded corporate profits and led to hundreds of thousands of layoffs this year.
"In spite of an economy flirting with recession, the housing sector continues to display resilience," said David Lereah, chief economist for the realtors' group.
The Federal Reserve begins a two-day meeting Tuesday in which it will discuss whether to cut short-term interest rates for the sixth time this year in an effort to keep the economy afloat. The home sales data, though surprisingly strong, would likely have little effect on Fed policy makers' decision.
"There are probably more important things the Fed is focusing on," said Kathleen Camilli, chief economist with Tucker Anthony, including recent job cuts and the early pre-announcements of second-quarter corporate results, many of which have been disappointing. "The notion of a second-half [of the year] recovery is fading quickly."
Though a majority of economists -- according to polls taken by Reuters and CNNfn.com -- think the Fed will cut rates by a quarter of a percentage point, to 3.75 percent from 4 percent, Camilli is part of a rapidly growing body of economists who think the Fed will cut rates by half a percentage point to 3.5 percent.
On Wall Street, traders were reluctant to bet on what the Fed would do. In midday trading, tech stocks were little changed, while the Dow Jones industrial average was down slightly.
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The median sale price of a single-family home hit $145,500 in May, the highest on record, NAR said. Half the homes sold were above the median price while half were below.
"The increase in sales is renewing the downward pressure on inventory, which had begun to ease, so prices are set to keep rising rapidly," said Ian Shepherdson, chief U.S. economist with High Frequency Economics Ltd. 
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