New Home Sales Down 14% After Summer Buying Binge

New home sales fell a dramatic 14% in September, the government reported Tuesday, but analysts said a truer--and more optimistic--picture of the housing industry would be obtained by averaging sales over several months.

Many economists also predicted that mortgage interest rates would continue to fall, leading to some improvement in the industry but, as one said, “no major resurgence.”

The Commerce Department said new single-family homes were sold at a seasonally adjusted annual rate of 618,000 units in September, compared to 719,000 units in August, the sharpest drop since a 19% decline in January, 1982, during the last recession.

The August sales had been revised sharply downward from 758,000 but still approximated the level in July, when sales gained 14.6% to an annual rate of 742,000 units.

“The September numbers reflect a market correction from extraordinarily high sales activity in July and August that could not be sustained,” said chief economist John A. Tuccillo of the National Assn. of Realtors.

“Buyers flooded the new home market last summer when mortgage rates started falling and as a result borrowed sales from September.”

“A better measure is probably gotten by averaging the three months,” agreed chief economist David Berson of the Federal National Mortgage Assn. “That shows that home sales picked up in the third quarter, primarily because of a decline in mortgage rates.”

Analysts had credited the July advance to a decline in fixed-rate mortgages to 9.81% by the end of that month from a peak of 11.22% in March.

But rates edged back up to 10.22% by the end of August and remained in that range throughout September, according to surveys by the Federal Home Loan Mortgage Corp.

Richard Peach, an economist with the Mortgage Bankers Assn., said rates should continue to fall between now and mid-1990, resulting in further improvement in the housing industry, but “no major resurgence.”