Sales of New Homes at Worst Rate in 5 Years

New home sales in 1989, held back in part by a 9.6% decline in December, posted their worst record in five years, the government said Wednesday, but some analysts said falling mortgage rates should boost sales in 1990.

“The year wasn’t a gang buster by any means,” said Richard Peach, an economist for the Mortgage Bankers Assn. “But I wouldn’t characterize it as a disaster either.”

Peach and others said they were confident that rates will be coming down in the not-too-distant future, resulting in renewed sales.

The Commerce Department said new single-family homes were sold at a seasonally adjusted annual rate of 629,000 units in December after jumping 9.3% in November.

Analysts said December’s decline was due to severe weather in much of the country and to a correction from November’s unsustainable pace.

December sales brought to 650,000 units the total sold in 1989, the worst year since 639,000 homes were sold in 1984. The 1989 total was 3.8% less than the 676,000 units sold in 1988.

The construction industry was hampered through much of 1989 by high interest rates.

The Mortgage Bankers are forecasting sales in the 670,000 to 680,000 range this year, “predicated on further declines in mortgage rates,” Peach said.

But rates were again on the rise in January. David Berson, chief economist for the Federal National Mortgage Assn., said the rates probably would hold down any January improvement.

On a regional basis, new-home sales in December rose at an annual rate of 4% in the Northeast to 105,000 units, but fell elsewhere. Sales plummeted 28.3% to 91,000 units in the Midwest and were off 9.1% to 190,000 units in the West and fell 6.2% to 243,000 units in the South.

NEW HOME SALES

Seasonally adjusted annual rate, thousands of units. Dec.,’89: 629. Nov.,’89: 696. Dec.,’88: 669.