Rate Cuts Push New Home Sales Up 7.9%

The government said Thursday that sales of new homes in June rose for the first time in five months, and analysts predicted that falling mortgage rates and a possible tax credit would help build momentum.

The departments of Commerce and Housing and Urban Development said sales rose 7.9% to a seasonally adjusted annual rate of 572,000 units, up from 530,000 in May.

Double-digit gains in the Northeast and West more than offset slight declines in the Midwest and South.

The report also showed that the sales declines in March, April and May were not as deep as previously estimated, although activity in the housing industry in the second quarter slowed considerably from the first.

Sales averaged 546,000 at an annual rate from April through June, down from 613,000 from January through March. But a 15.4% increase in January, together with the June advance, helped push sales for the first six months 18% above those for the first half of 1991.

Boosting optimism for third-quarter activity was a sharp drop in mortgage rates.

Since the Federal Reserve slashed short-term interest rates earlier this month, surveys by the Mortgage Bankers of America show applications for mortgages have risen to levels near their peak last January.

In addition, some analysts believe that the Senate Finance Committee provided additional stimulus Wednesday when it approved a tax credit for home buyers who have not owned homes in the last three years.

In June, sales of new homes rose 30.3% to an annual rate of 86,000 in the Northeast following a 29.4% jump a month earlier. They were up 28.9% in the West to 147,000, nearly recovering a 30.1% loss the previous month.

But sales fell 2.9% to a 101,000 rate in the Midwest. In the South, they dropped 2.8% to 239,000.

* MAIN STORY: A1

New Home Sales

Seasonally adjusted annual rate, thousands of units

June, ‘92: 572

May, ‘92: 530

June, ‘91: 513

Source: Commerce Department