New Home Sales Rise to 6-Year High : Economy: Growth remains sluggish because of job worries and employer uncertainty, analysts say.
Low interest rates and good weather in April pushed nationwide new home sales to their highest levels in more than six years, the Commerce Department reported Wednesday.
But in a separate report, the department said its index of leading economic indicators barely grew that month--increasing only 0.1%--suggesting that the nation’s economy remains sluggish at best.
“The economy is not in any kind of definitive recovery, nor in a recession,” said Gary L. Ciminero, chief economist at Fleet Financial Group in Providence, R.I.
Sales of new, single-family homes surged 22.7% from March to an annual seasonally adjusted rate of 751,000 homes--36% above the April, 1992, level and the highest since December, 1986.
The sales in April partly reflected a pent-up demand from March, when bad weather held down buying activity. They also resulted from the lowest mortgage rates in more than 20 years.
“For those of us in the housing field, it’s very good news indeed,” said Lyle E. Gramley, consulting economist with the Mortgage Bankers Assn. in Washington.
Home sales improved in all regions but were strongest in the Northeast states, where they shot up 102% to an annual rate of 111,000 units. The region was hit by a blizzard in March.
In the South, where storms raked Florida in March, April home sales were up 17.1%. In the West, sales were up 13.4%.
Still, economists questioned whether the feverish pace would keep up. “Wait to see if that higher level of new home sales gets repeated in the months ahead,” Ciminero said.
Meanwhile, the growth in the composite index of leading economic indicators--which is intended to predict future movements in the economy--was lower than many economists had expected.
The 0.1% growth, on the heels of a steep 1% drop in March, casts further doubt on predictions that the U.S. economy will grow 3% this year. The composite index hit a level of 152, which was 2.5% above April, 1992.
Economists attributed the sluggish growth to employer uncertainty about the costs of President Clinton’s proposed deficit-reduction package and health care reforms and continuing consumer worries about jobs.
All of which suggests that a slow economy may persist longer than expected, said economist David Hensley, director of the UCLA Business Forecasting Project.
Six of the 11 leading indicators improved in April: the average factory workweek lengthened, more new building permits were issued, business delivery times slowed, new factory orders increased, consumer confidence grew and new claims for unemployment benefits dropped.
But five worsened: Orders for new commercial buildings and equipment fell, the money supply shrank, the backlog of factory orders dropped, prices of raw materials fell and stock prices dipped.
The Labor Department is scheduled to publish its report on May unemployment Friday.
New Home Sales
Seasonaly adjusted annual rate, thousands of units.
751,000, highest since December, 1986
April, 1993: 751
March, 1993: 612
April, 1992: 552
Source: Commerce Department
