New Home Sales Soar 9.6%; Rate Drop Cited

New home sales jumped 9.6% in November, their fastest gain in four months, the government said Wednesday. Analysts said the housing industry continues to be aided by lower mortgage rates.

“It shows that when mortgage rates are at relatively affordable levels, buyers will be buying homes,” said Mark Obrinsky, an economist with the Federal National Mortgage Assn.

Michael Carliner, an economist with the National Assn. of Home Builders, agreed that the report shows “consumers are responding to lower interest rates.”

But Carliner added that many home builders are concerned whether rates will remain at low levels this year, saying that “in the five years I’ve been here, I’ve never seen them so nervous.”

The Commerce Department said new, single-family homes were sold at a seasonally adjusted annual rate of 710,000 units in November after a revised 0.9% gain the month before. October sales originally were reported down 0.5%.

It was the sharpest surge since a 14.1% advance last July.

“This certainly should take some of the wind out of stories that the housing market is about to collapse,” said economist Richard Peach of the Mortgage Bankers Assn.

Peach noted that in addition to new home sales, sales of existing houses also hit a fairly good pace in November and that housing starts, “while not rising like gangbusters,” are improving.

Some analysts, including Carliner and Obrinsky, saw the possibility of slightly higher mortgage interest rates this year as the Federal Reserve straddles a fine line of trying to keep inflation under control by restraining credit while not pushing the economy into a recession with high interest rates.

The Fed began last June to let short-term rates drop gradually. Mortgage rates have fallen from an 11.22% peak to 9.74% at the end of November, according to the Federal Home Loan Mortgage Corp.

Nevertheless, new home sales for the first 11 months of last year were down 3.5% from the same period in 1988.

The sharpest gain in new home sales in November occurred in the West, which posted a 29.9% advance. Analysts attributed much of the increase to a rebound from depressed sales after the Oct. 17 Bay Area Earthquake. October sales in the region had plummeted 21.6%.

The Midwest also recorded strong sales, up 23.6%. Sales in the Northeast rose 8.5%.

The South had the only decline, a drop of 7.6%.