Dramatic Nationwide Drop-Off Reported in Sales of New Homes : Economy: Southland resale market appears to buck that trend as some agents note brisk rate of transactions.
Sales of new homes plummeted in June to the lowest level in two years, the Commerce Department said Tuesday, as rising interest rates sapped business across the country.
Sales dropped 14.1% to a seasonally adjusted annual rate of 591,000 units--the lowest since 584,000 in June, 1992--after a revised 2.2% rise in May and a 6.8% fall in April.
Surprisingly, the biggest drop in home sales came not in the West but in the South and Northeast, said Steve Berman, a survey statistician in the department’s Bureau of the Census.
In the West, which includes both the Coastal and Rocky Mountain states, new home sales were down 10.7% to a rate of 175,000, the lowest in a year.
But in the Northeast, sales dropped 18.6% to a rate of 48,000, and in the South they fell 19.1% to a rate of 254,000--in each case the lowest level of sales since August, 1992, department officials said.
“The West Coast had been lagging the rest of the country in terms of a housing recovery, especially California and Southern California,” said Michael Carliner, an economist with the National Assn. of Home Builders, a trade group in Washington. “The Mountain states had been doing reasonably well, based mainly on people leaving California.”
A one-month drop is not enough to establish a trend, and Southern California real estate brokers Tuesday said they had mixed experiences in the overall housing market, including resales.
In Beverly Hills, Prudential real estate broker Anita Harris said sales of expensive homes had been nonexistent for several weeks.
But in the western San Fernando Valley, “we had an excellent month in June and in July,” said Bobbi Miller, manager of the Woodland Hills office of Fred Sands Realtors. “Sales are up over last year, absolutely.”
In June, Miller’s office sold 80 homes, about the same as the month before. “We don’t think the housing market is slowing,” Miller said. “It’s very brisk.”
Previously, the department said May sales nationally had risen 4.2% to a seasonally adjusted annual rate of 738,000. But it revised that sales rate sharply downward.
The June sales plunge was the steepest since January, when they fell 21.4% to a rate of 642,000. Sales were also down 7.8% from levels of a year ago, in June, 1993, when they were at a rate of 641,000.
Last week, the National Realtors Assn. said sales of existing or used homes also slipped in June--though less dramatically--down 3.6% to a seasonally adjusted annual rate of 3.96 million.
Industry analysts say rising interest rates are putting a damper on construction and sales of homes and that a modest second-half downturn is likely.
Long-term mortgage rates bottomed out last October at 6.74% and have risen sharply since then. The Federal Home Loan Mortgage Corp. said average rates for a 30-year mortgage loan rose slightly to 8.57% last week from 8.52% a week earlier.
The Federal Reserve Board has raised short-term interest rates four times this year, aiming to moderate the pace of economic activity, and interest-sensitive sectors such as housing show the impact in weakening sales and building rates.
New home sales suffered in every region of the country during June.
Midwest sales eased by 3.4% to a rate of 114,000.
The average home sales price in June of $157,200 was up from $150,700 in May. It was the highest since August, 1989.
New Home Sales
Seasonally adjusted annual rate, in thousands of units:
Source: Commerce Department