New-Home Sales Fall Slightly in February

Americans bought fewer new homes in February as mortgage rates rose, yet the level of sales remained robust overall.

The Commerce Department on Wednesday reported that sales of new homes fell by an unexpected 0.5% last month, but the seasonally adjusted annual rate was 919,000, higher than expected.

“Builders must be in heaven as new-home sales remained incredibly robust in February,” said economist Joel Naroff of Naroff Economic Advisors. “So far, there has yet to be any major pullback in new-home demand.”

Even with the decrease, February’s sales were 2.9% higher than the total for February 1999.

With plentiful jobs, rising incomes, strong stock markets and low inflation, Americans are in a position to buy even though mortgage rates have gone up, said National Assn. of Home Builders economist Michael Carliner.

“Confident or maybe overconfident home buyers are pressing forward even in the face of steadily rising rates--much like they did in the early 1980s before the real estate boom busted,” said Oscar Gonzalez, economist with John Hancock. “It seems [Federal Reserve Chairman Alan] Greenspan and the Fed will have to ratchet up the pain before home buyers back off.”

The average rate on a 30-year fixed-rate mortgage in February was 8.33%, up from 8.21% the month before. In February 1999, the average rate on a 30-year mortgage was 6.81%.

Sales of new homes rose a revised 0.3% in January to a rate of 924,000, the highest level since July. That was a much stronger showing than the 4.2% decline the government previously reported. Economists blamed the big revision on volatility in the data.

In February, new-home sales rose a strong 15.6% in the Midwest to a seasonally adjusted annual rate of 170,000. Sales in the Northeast grew by 1.2% to a rate of 86,000. But sales in the West fell by 10.7% to a rate of 234,000, and sales in the South fell by 0.2% to a rate of 429,000.

Meanwhile, the median price of a new home--meaning half sold for more and half sold for less--rose to $162,000, up 2.5% from January’s price of $158,000.

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New-Home Sales

Seasonally adjusted annual rate, in thousands of units:

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February: 919,000 units

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Source: Commerce Department