Home Sales Off 9.6% in October as Prices Rise

Sales of new homes fell 9.6% in October, the government said Wednesday, and analysts blamed the sixth setback in seven months on rising home prices and supply problems in the Northeast.

The Commerce Department said new single-family homes were sold at a seasonally adjusted annual rate of 662,000 units in October, down from a revised September rate of 732,000 units.

The October decline left sales 28.4% below their peak rate this year of 924,000 units reached in March when sharply falling mortgage interest rates triggered a sales boom.

Since that time, sales have fallen in every month except September, when they posted an 18.4% increase.

Overall, a Good Year

Still, sales for the first 10 months of the year are running 10.5% ahead of the pace set during the same period in 1985, and analysts expect that 1986 will be the best year for the housing industry since 1978.

Even with the sales slump, the median price of a new home climbed again in October to $93,600. That is 2.1% higher than the September new-home price and 9.6% higher than a year ago, when the median home price was $85,400. The median price means half of the homes sold for more and half for less.

Analysts noted that sales of existing homes are now at their highest levels in seven years, hitting an annual rate of 3.7 million units in both September and October.

Mark Obrinsky, economist for the U.S. League of Savings Institutions, said a widening spread between the price of a new home and an existing home apparently is hurting new-home sales. The median price of an existing home sold in October was $79,700, almost $14,000 lower than the new-home median price. The difference had been only $9,000 in 1985.

Michael Sumichrast, an economist with the National Assn. of Home Builders, said skyrocketing costs for available land in hot real estate areas such as the Northeast and Southern California were partly to blame for the rising home costs.

Lyle Gramley, chief economist for the Mortgage Bankers Assn., said builders in the Northeast were having trouble locating available lots on which to put new homes and this problem, rather than slack demand, dampened new-home sales in October.

For this year, many economists believe new-home sales will top 730,000 units, but forecasters expect a slight decline next year with Gramley predicting that sales in 1987 would range between 650,000 and 700,000 units, still a healthy performance.

Many of the economists said they were not looking for mortgage rates to change much from the fixed-rate average of 9.5% nationwide. This is the first year that mortgage rates have dipped below 10% since 1978.

Obrinsky said rates were likely to stay around this level over the next year, perhaps rising as high as 10% or falling to 9% for brief periods.