Sales of New Homes Decline; Quake Blamed
WASHINGTON — Sales of new homes fell 0.5% in October, the government reported Monday. Analysts said overall purchases were driven down by a 24.7% decline in the West due to the Bay Area Quake and the effects of the slowing economy.
But economists said the sales pace should improve somewhat over the next few months as mortgage interest rates drop to the mid-9% range. No analyst predicted a surge in sales.
“The report says housing market activity has improved some from the sluggish pace of March and February, but that the market is by no means taking off,†Thomas Holloway, senior economist for the Mortgage Bankers Assn., said.
The Commerce Department said new single-family homes were sold at a seasonally adjusted annual rate of 649,000 units in October following a revised 10.2% plunge in September. September sales originally were reported down 14%.
Sales in the West fell 53,000 units on an annual basis to 161,000 homes. But all other regions posted gains, prompting David Berson, chief economist for the Federal National Mortgage Assn., to conclude “the earthquake appeared to keep people from buying new homes.â€
Michael Carliner, an economist with the National Assn. of Home Builders, said economic sluggishness also contributed to the lack of Western sales. Part of the problem, he said, was slower defense spending, which resulted in significant layoffs.
Home sales had fallen dramatically earlier this year as the Federal Reserve Board pumped up interest rates to slow the economy and thus contain inflation. As inflationary pressures cooled, however, the Fed has permitted gradual decreases in rates since the beginning of the summer.
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