Home Sales Rise 0.6% in Dec., Show Slight Rebound During ’88

Sales of new homes rose 0.6% in December, closing out a year in which sales rebounded slightly after plunging during 1987, the government reported today.

The Commerce Department said sales for all of 1988 totaled 677,000 units, up 0.9% from the 671,000 sold during the previous year. Last year’s level was the highest since 750,000 homes were sold in 1986.

Home sales had plunged 10.5% in 1987, with the decrease blamed on higher mortgage interest rates and a slowdown in demand after five strong sales years.

December’s increase pushed the seasonally adjusted annual sales rate to 669,000 for the month, up from 665,000 in November, when sales had been down 7.9%.

All of the December strength came in the Northeast, where sales rose 52.9% to a seasonally adjusted annual rate of 104,000. Sales were down 22.1% in the Midwest, 2.0% 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.

The median price of a new home rose 9.7% in December to $121,000, up from a median price of $110,300 in November, meaning half sold for more and half for less. The average price of a new home also was up, rising 11.1% to $152,200.

For the year, the median price of a new home was $112,500, up 7.7% from a year earlier. The average price was $138,300, up 8.7%.

Many analysts are expecting home sales to weaken in 1989 due to higher mortgage interest rates early this year and slower job creation.

Fixed-rate mortgages last week stood at 10.60%, according to a survey by the Federal Home Loan Mortgage Corp., up from 10.16% a year earlier.

Many economists are predicting that mortgage interest rates could hit 11.5% by the middle of the year.