WASHINGTON (AP) â€” Sales of new homes soared in September by a surprising 9.2 percent to the highest level in six months as cheaper mortgage rates encouraged buyers to lock in deals. But consumer confidence fell sharply in October to it lowest point in a year.
Americans purchased new single-family homes at a seasonally adjusted annual rate of 946,000 in September, the highest level since a rate of 947,000 homes in March, the Commerce Department said Tuesday.
The 9.2 percent increase, the largest since an 11 percent rise in July, was not expected. Many analysts were predicting new-home sales would fall by 0.7 percent.
On Wall Street, the Dow Jones industrial average lost 17 points in the first hour of trading Tuesday but the Nasdaq index gained 95 points.
In a second report, the New York-based Conference Board said its Consumer Confidence Index fell to 135.2 in October, a steep drop from the revised 142.5 reported in September and the record high of 144.7 registered in May and January.
The drop is a potentially worrisome sign for the approaching holiday retail season.
The Conference Board index, based on a monthly survey of some 5,000 U.S. households, is closely watched because consumer spending accounts for about two-thirds of the nation's economic activity. The index compares results with its base year, 1985, when it stood at 100.
In the housing report, new-home sales fell 5.8 percent in August, according to revised figures, a weaker performance than the 3 percent drop the government reported one month ago.
The Federal Reserve has boosted interest rates six times since June 1999 to slow the economy and keep inflation under control. The Fed's rate increases are designed to raise borrowing costs and cool demand for big-ticket items such as homes and cars. Economists believe the Fed's rate increases are working to slow economic growth. In the third quarter, the economy grew at a 2.7 percent annual rate, the slowest pace in more than a year.
In September, mortgage rates continued to creep down as the moderating economy reduced pressure on long-term interest rates. The average interest rate on a fixed-rate 30-year mortgage was 7.91 percent last month, down from 8.03 percent in August, but higher than the 7.82 percent rate in September 1999.
The increase in home sales in September pushed prices up as well.
The median sales price, the midpoint where half the homes sold for more and half for less, increased by 2 percent to $165,200 in September.
The average price of a new home sold in September was $202,000, up 1.5 percent from August's average of $199,100.
Sales were up in all parts of the country except the Northeast.
In the Midwest, sales rose a whopping 17.3 percent to an annual rate of 190,000, the highest level since October 1999. Sales in the West grew by 9.2 percent to a rate of 261,000. In the South, they rose by 8.6 percent to a rate of 431,000, the highest level since February.
But in the Northeast, sales fell by 4.5 percent to a rate of 64,000, the lowest level since May 1996.
The supply of unsold homes fell from 4.3 months in August to 3.9 months in September, the lowest level since December 1998. That means it would take 3.9 months to exhaust the stock of unsold homes at the September sales pace.
Last week, the National Association of Realtors reported that sales of previously occupied homes slipped 2.7 percent in September to a seasonally adjusted annual rate of 5.14 million. Economists said stock market turbulence and surging oil prices discouraged prospective buyers.
Housing activity â€” an engine of the robust economy â€” is expected to moderate this year but still be at robust levels.