Home Sales Continue at Torrid Pace

No Sign Yet of Market Slowing Down Soon

Sales and prices of existing homes rose to record highs in April, an industry group reported yesterday, four days after Federal Reserve Chairman Alan Greenspan warned in his strongest language yet that housing prices have climbed to "unsustainable" levels in many markets.

Greenspan and other Fed officials have said for a while that home-price appreciation should slow in coming months as interest rates rise, most likely in a gradual manner that will not harm the overall economy. But that process has not even begun.

U.S. sales of previously owned homes -- including single-family, townhouse, condominium and co-op units -- rose 4.5 percent to an annual rate of 7.18 million units last month, after adjusting for seasonal variation, the National Association of Realtors said yesterday.

The national median price for all previously owned homes rose to $206,000 in April, up 15.1 percent from a year earlier -- the fastest monthly gain in nearly 25 years.

The figures support the belief that the housing market will stay strong as long as mortgage rates remain low, said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd., a research firm.

"There is no chance of a spontaneous slowing in home sales," Shepherdson wrote in an analysis for clients. "The market will soften if -- and only if -- mortgage rates rise significantly."

The national average interest rate for a conventional, fixed 30-year mortgage loan fell in April to 5.86 percent from 5.93 percent in March, according to mortgage financier Freddie Mac. The average dropped last week to 5.71 percent.

Some analysts warn that the higher home prices go, the greater the possibility of a painful drop in house values at some point.

The Realtors association's figures "will undoubtedly reinforce the concerns that many observers, including us, have about the likelihood of a nasty correction in the housing market," economists at Goldman Sachs US Economics Research wrote. "The correction is probably not yet at hand; but when it comes, it could be a doozie."

Meanwhile, the hot real estate market is supporting the nation's overall economic growth by giving consumers more money at a time of lackluster wage growth and high energy costs, analysts said.

"Higher [house] prices mean more equity for homeowners and more cash in the hands of consumers," said Peter Morici, a professor at the University of Maryland's business school. "Robust housing sales indicate that the real estate boom will continue to drive the economic recovery."

Greenspan, however, warned Friday that house prices appear to be out of whack in several markets. "We don't perceive that there is a national bubble, but it's hard not to see that there . . . are a lot of local bubbles," he said while answering questions after he gave a speech on energy to the National Economic Club of New York, according to a transcript prepared by Bloomberg News. Investment "bubbles" occur when purchases are driven largely by the expectation that the price of some asset -- stocks, bonds or real estate, for example -- will keep rising, rather than by the buyers' desire to possess that asset.