Sales of New Homes Skid to 9-Year Low

Triggered by continued consumer uncertainty about the economy and events in the Persian Gulf, new-home sales plunged in December to their lowest level in nine years as Americans virtually stopped buying new houses, the Commerce Department said Wednesday.

The 6.7% drop in new-home sales in December exceeded the forecasts of many analysts who have watched home sales fall now in five out of the last six months.

The Commerce Department said new-home sales totaled a seasonally adjusted annual rate of 463,000 units in December, the lowest level since 407,000 homes were sold in August, 1982. New-home sales in 1990 fell for the second consecutive year, down 17.5% to 536,000 units, the smallest number since 412,000 homes were sold in 1982.

New-home sales eked out a gain in the West during December, rising 1.7% to 122,000 units. Sales were off 1.4% in the Northeast to 73,000 units, 13.2% in the South to 184,000 and 7.8% in the Midwest to 83,000.

“What the numbers show is that there continues to be weakness in the new-home market, even though mortgage rates declined from November to December,” said Mark H. Obrinksy, senior economist at the Federal National Mortgage Assn. in Washington. “I don’t see anything to indicate we’re near a turnaround.”

Still, some analysts found hope in a Conference Board survey that said consumer confidence may be rebounding after dropping immediately after the outbreak of war.

The Conference Board survey released Tuesday found that while views about current conditions darkened in January, expectations about the nation’s outlook six months from now brightened somewhat. As a result, some analysts predict, the nation’s housing collapse may bottom out by spring.

“Our forecast is that the housing market will bottom out in the first quarter of this year,” said David F. Seiders, chief economist for the National Assn. of Home Builders. “We spotted an improvement in consumer sentiment after the war broke out.” Seiders said consumers are saying to themselves now: “ ‘At least it’s settled whether or not we are going to war.’ ”

The contraction in the housing industry has cost nearly 300,000 construction jobs across the country since last spring. The slump has been especially bad news for California’s huge construction industry, which had created about one-fourth of all new employment in the state since 1982, according to a forecast issued by David Hensley, acting director of business forecasting at UCLA.