Sales of New Homes Off 2.6% in September : Analysts Say 2nd Straight Drop to Hurt Economy
Housing sales, despite some of the most attractive mortgage rates in years, fell 2.6% in September, the second consecutive monthly decline, the government said Wednesday.
Some analysts blamed the slowdown on the adverse impact of slow personal income growth and high consumer debt burdens and said the dip in housing sales would likely depress overall economic activity in coming months.
Sales of new single-family homes declined to an annual rate of 681,000 units last month, following a 5.4% sales drop in August, according to the Commerce and Housing and Urban Development departments.
The declines came despite the fact that fixed-rate mortgages can be obtained in many parts of the country for about 12.25%, down from a high a year ago of 15.2% and the lowest rate in five years.
Economists, who had expected low mortgage rates to keep sales strong at least through the summer, said the August and September declines could reflect growing concerns on the part of consumers.
“Income gains have been slowing for the past three months, the personal savings rate has dropped to a record low level and household debt is at a record high,” said David Wyss, an economist at Data Resources, a private forecasting firm. “People are getting reluctant to take on any more debt.”
He said the drop in new-home sales had already affected housing construction, which fell 9.3% in September, the biggest drop since May.
With the peak months of the 1985 selling season now over, it will be next spring before the housing industry is likely to show much life, Wyss said, with this slowdown likely to hold back overall economic growth as well.
Other analysts said a variety of regional factors ranging from Hurricane Gloria in the Northeast to the depressed farm economy in the Midwest played a role in the September sales decline.
Sales were down a sharp 21.3% in both the Northeast and the Midwest.
Warren Lasko, executive vice president of the Mortgage Bankers Assn., said that some of the decline in sales could be the result of tighter standards being applied by lending institutions to people seeking loans.
The sales report not only showed a decline in September but revised downward the sales level for both July and August. Sales this year reached a high of 739,000 units at an annual rate in July, dropping to 699,000 units in August.
In California, existing single-family home sales in September were pegged at a seasonally adjusted annual rate of 382,691 units, an 11.4% drop from August’s figure of 431,819 sales. The September statistics, however, increased 29.1% from a year ago, when resales totaled 296,430 units.
Prices of existing single-family homes showed substantial strength in September, according to the California Assn. of Realtors. The California median-priced home in September recorded a sale price of $123,844, a 2.6% increase from August’s $120,649 and a 10.2% jump from the September, 1984, figure of $112,387.