New Home Sales Fall 5th Time This Year
New home sales in July declined for the fifth time in seven months, the government said Wednesday, and industry observers said rising mortgage rates linked to the Mideast crisis will compound the decline in months ahead.
“We will be facing a few months of significant weakness because of the run-up in rates,” said Robert Villanueva, forecasting director for the National Assn. of Home Builders.
“At least for the remainder of the year, it’s difficult to be optimistic,” said James Nelson, president-elect of the Mortgage Bankers Assn. and chief executive of Eberhardt Co., a Minneapolis mortgage banking company.
The Commerce Department said new homes sold at a seasonally adjusted annual rate of 548,000 units, down from 561,000 units in June and 741,000 in July, 1989.
At the same time, the department offered evidence of even more sluggishness earlier, revising downward the sales totals in both May and June.
It said sales edged up just 0.6% in May rather than the 2.3% reported last month, and 4.7% in June instead of the 8% in the earlier report.
For the first seven months of the year, sales have fallen 12.4% below the pace of 1989.
The department also said inventories of new homes showed a 7.8-month backlog at the July sales pace. It had been 7.7 months in June.
Analysts had expected a pickup in sales in July as fixed-rate, 30-year mortgage rates continued to slide from their 1990 peak of 10.67% in May to 9.98% by the end of the month.
But Mark Obrinsky, an economist with the Federal National Mortgage Assn., said consumer confidence was waning even before the Aug. 2 Iraqi invasion of Kuwait because of uncertainty over the economy.
“When that happens, they tend to postpone purchases of high-priced things,” he said.
Nevertheless, sales of existing homes did rise in July, up 3.3% to a seasonally adjusted annual rate of 3.44 million units, according to the National Assn. of Realtors.
John A. Tuccillo, the association’s chief economist, said sales of existing homes advanced because of their lower prices.
The median price of a new home was $121,000 in July, Commerce said. That was down 4.7% from June but still $22,600 more than the $98,400 median price for an existing home in the Realtors’ survey.