New Home Sales Record a Modest 0.9% Gain for 1988

New home sales edged up a meager 0.9% last year, the government said Thursday in a report that analysts cited as evidence that higher mortgage interest rates continue to dampen activity in the housing market.

Sales for 1988 totaled 677,000 dwellings, up from 671,000 sold during the previous year, the Commerce Department reported. Home sales had plunged 10.5% in 1987, with the drop attributed to rising interest rates and a slowdown in demand after five strong sales years.

Analysts said they expected continued increases in interest rates and a slowdown in the economy to result in a modest decrease in new home sales this year.

“The bottom’s not falling out of the market by any means but we do expect a modest slowing,” said economist Richard Peach of the Mortgage Bankers Assn.

Fixed-rate mortgages last week stood at 10.6%, up from 10.16% a year earlier, according to a survey by the Federal Home Loan Mortgage Corp. Many economists are predicting interest rates could hit 11.5% by the middle of this year.

Last year’s new home sales ended with a slight upturn, as sales for December rose 0.6% to a seasonally adjusted annual rate of 669,000 after dropping 7.9% during the previous month.

All of December’s strength came from the Northeast, where sales rose a surprising 52.9% to a seasonally adjusted annual rate of 104,000. Sales were down 22.1% in the Midwest, 2% in the South and 1.3% in the West.

However, for the year overall, the Northeast was the only region to post a decline, with sales down 13.7% to 101,000. Sales were up 9.7% in the West, 1.1% in the South and 1% in the Midwest.

NEW HOME SALES Seasonally adjusted annual rate, thousands of units

Dec., ’88 rate: 669,000 units Source: Commerce Department