Sales of New Homes in Free Fall, Hit an 8-Year Low in October

Sales of new homes dropped 3.5% in October to the lowest level in eight years, the government reported today. But analysts said the free fall may be bottoming out and sales should begin rebounding by spring.

“Sales should be leveling off at this number in the fourth quarter and the first quarter of next year,” assuming mortgage rates continue to fall and the Mideast problem is resolved, said economist David G. Seiders of the National Assn. of Home Builders.

Economist Mark H. Obrinsky of the Federal National Mortgage Assn. suggested that sales may zig-zag for several months, “but assuming no blowup in the Middle East . . . I expect to see a more sustained pickup by spring of 1991.”

Sales totaled a seasonally adjusted annual rate of 491,000, the Departments of Commerce and Housing and Urban Development said in a joint release. That was the lowest since 480,000 new homes were sold in October, 1982.

So far this year, new home sales are off 15.8% from the same period of 1989.

Sales fell 4% in September and 2% in August. The September figure was revised from 6% in the departments’ initial estimate, but the October total was worse than the 1.8% drop first reported.

Obrinsky said the main reason for the decline “is great consumer uncertainty and generally negative buying sentiment.”

The median price of a new home sold in October was $121,800, up from $112,900 in September but down from $123,000 a year ago.

Seiders attributed the price increase to a hefty 47.4% gain in sales in the Northeast, which has the highest housing costs in the nation. Sales there totaled an annual rate of 84,000 units after falling 12.9% the previous month.

Sales in all other regions fell, including a drop of 18.2% in the West to 112,000 units. That was the lowest since 106,000 homes were sold in September, 1982.

In the Midwest, sales were off 11.7% to 83,000 units. Sales dropped 4.1% in the South to 212,000 units.