New-home sales fall by 1.4 percent to lowest level in a year, reflecting attacks, layoffs
Friday, October 26th 2001, 12:00 am
By: News On 6
WASHINGTON (AP) _ Sales of new homes fell in September to their lowest level in a year as rising layoffs and new uncertainties raised by the terror attacks made Americans shy away from big-ticket purchases.
The Commerce Department reported Friday that new-home sales declined by 1.4 percent to a seasonally adjusted annual rate of 864,000. That was the lowest level since August 2000 when a rate of 839,000 homes were sold.
Last month's drop comes on top of a 2.9 percent decline in new-home sales in August, according to revised figures. The government had previously reported that sales rose 0.6 percent.
Stocks were higher in early trading. The Dow Jones industrial average gained 44 points in the first hour of trading; the Nasdaq index was up 6 points.
The housing market has been a pillar of the ailing economy. But fallout from the Sept. 11 terrorists attacks on the World Trade Center and Pentagon has taken a bite out of sales and is expected to dampen demand in the coming months, economists and builders say.
Economists say damage to the housing market could be worse, but low mortgage rates are providing a cushion. The average interest on a 30-year fixed rate mortgage in September was 6.82 percent, down from 6.95 percent in August. In September 2000, the rate stood at 7.91 percent.
By region, sales in the Northeast took the biggest hit in September, plunging by 26.6 percent to a rate of 47,000, the lowest level since January 1996 when sales also were at that level.
In the West, sales declined by 8.2 percent to a rate of 224,000 and in the South they fell by 1.4 percent to a rate of 416,000. But in the Midwest, sales jumped by 21.2 percent to a rate of 177,000.
The drop in sales pulled home prices down in September. The median sales prices, which half sell for more and half sell for less was $162,400, a 5.1 percent decline from the month before.
And, the average sales price fell by 3.8 percent in September from the previous month to $195,700.
The shock of the terror attacks also have taken a toll on sales of existing homes.
On Thursday, the National Association of Realtors reported that sales of previously owned homes, one of the economy's few bright spots, plummeted by 11.7 percent in September, the biggest one-month drop in six years.
Before the attacks economists were hopeful the economy, stuck in a more than yearlong slump, would begin to recover by the end of the year. Now, most economists believe a recession this year is unavoidable.
Many analysts believe when the gross domestic product figure for July-September quarter is released Wednesday, it will show economic output falling at a rate of around 1 percent with the decline expected to accelerate to a 2 percent drop in the current quarter.
A recession is traditionally defined as two consecutive quarters of declining economic output.
New uncertainties raised by threats of anthrax and other bioterror attacks are making economists wonder how long any downturn will linger.
To help the economy, the Federal Reserve has cut interest rates nine times this year, with two reductions coming after the Sept 11 attacks. Many economists are looking for another rate cut when the Fed meets next on Nov. 6.
The House on Wednesday, meanwhile, passed a $100 billion economic stimulus package, including tax cuts and increased government spending. The package is likely to undergo changes in the Senate.