Sales of New Homes Dropped 5.2% in September, Commerce Dept. Says

Sales of new homes, hurt by a sharp jump in mortgage rates, fell 5.2% in September, the biggest decline in four months, the government said Friday.

The Commerce Department said new single-family homes were sold at a seasonally adjusted annual rate of 656,000 units last month following increases of 2.5% in August and 5.3% in July.

The September setback was the biggest sales decline since an 11.5% drop in April. Analysts attributed the weakness to a big rise in mortgage rates during the month.

Fixed-rate mortgages climbed above 11% for the first time since late 1985. Rates continued increasing in early October and peaked at 11.58% on Oct. 16. However, the collapse of the stock market prompted the Federal Reserve to begin pursuing an easier money policy and rates have since edged back somewhat to 11.36%, according to a weekly survey by the Federal Home Loan Mortgage Corp.