P.M. BRIEFING : Increasing Interest Rates Cited as March New Home Sales Slip 5.5%

Sales of new homes fell 5.5% in March and registered their first back-to-back declines in more than a year, the government said today.

The Commerce Department said sales of new single-family homes dropped to a seasonally adjusted annual rate of 587,000 in March, following a 10.5% plunge in February.

It was the first time sales had declined for two consecutive months since they fell for five months in a row from September, 1987, through January, 1988, the months surrounding the October stock market crash.

The declines left sales in March at the slowest annual rate since the 576,000 level of January, 1988.

The report was another indication of the impact with which rising interest rates have hit the housing industry. Earlier reports on housing activity in March showed sales of existing homes declining for the third straight month and construction of new homes and apartments dropping for the second month in a row.

The Federal Reserve Board for a year has been pushing up interest rates in an effort to restrain economic growth and thus reduce inflationary pressures.