Record Sales for New Homes in ‘99; Dip Ahead?

U.S. consumers bought new homes at a faster than expected pace in December, the government said Wednesday, capping a record year for the housing market that may finally be showing signs of slowing under the weight of higher interest rates.

The Commerce Department said the number of new single-family homes sold in December rose 4.5% to a seasonally adjusted annual pace of 900,000 units, faster than the 889,000 pace economists expected.

Economists noted that new home sales were volatile in recent months due to hurricanes and other weather conditions. But the average over the last three months was 885,000 units, signaling a modest slowdown ahead.

“It may have been the last hurrah for new home sales, as the trend appears to be downward,” said Joel Naroff of Naroff Economic Advisors of Holland, Pa.

“Not only have long-term mortgages risen sharply, but once the Fed is done tightening, short-term adjustable-rate mortgages will also be relatively high,” Naroff said.

The Federal Reserve Board on Wednesday raised short-term interest rates a quarter point.

A record 904,000 single-family homes were sold in 1999, up 2% from 886,000 units sold in 1998, which was the previous record. The record came despite three interest-rate increases that pushed up the annual borrowing cost on the average 30-year mortgage by more than a percentage point to just above 8%.

Home sales in the West edged up 1.6%. Sales rose in most areas of the country except the Midwest, where they dropped 22.6%.