Sales of New Homes Fall 8% as Interest Rates Continue Up

Sales of new single-family homes fell 8% in November to a seasonally adjusted annual rate of 671,000 units, the Commerce Department said today.

Last month’s sales drop was the sharpest monthly decline since May, 1987, when sales fell 11.6%. Despite the decline, November home sales were 7.4% above their November, 1987, rate of 625,000 units, the department said.

Economists said the numbers, though disappointing, did not come as a surprise.

“We had expected to see a slow tapering-off of sales, so it appears this may be it,” said economist Mark Obrinsky of the U.S. League of Savings Institutions.

Home sales held up relatively well for several months in spite of rising interest rates, Obrinsky said, but added: “No one thought this was going to last forever.”

The league predicts that new-home sales will fall to a rate of 650,000 a year in 1989, he said.

Home sales have been expected to fall for the past few months, added chief economist Dave Seiders of the National Assn. of Homebuilders. “We certainly have expected a slowdown,” Seiders said. “Our forecast has been, and remains, for a weaker fourth quarter and weaker yet for the first three quarters of 1989.”

Home mortgage interest rates rose throughout November, “so the punch we had from adjustable-rate mortgages is not as strong anymore,” Seiders said.

Seiders said he expects home sales to fall gradually during the first three months of 1989 to an annual rate of about 665,000 homes, then decline to a 650,000-unit rate in the second quarter.

October home sales gained 4.4% from September levels to a 729,000-unit annual rate, the department said, revising its figure from the previously reported increase of 3.5%.

Before seasonal adjustment, the number of homes actually sold in November totaled 44,000, down from 58,000 in October but up from 43,000 in November, 1987.

The average home sold for $138,900 last month, down slightly from $140,000 in October and $139,200 last November. The median sale price in November was $110,200, down from $115,000 the previous month and $117,000 in November, 1987.

Regionally, November sales fell 27.3% in the Northeast, 7.5% in the South and 6.8% in the West. Sales rose only in the Midwest, climbing a moderate 5.2% from October levels.