New-home sales fall 10.9 percent in January
Thursday, March 1st 2001, 12:00 am
By: News On 6
WASHINGTON (AP) _ New-homes sales plummeted by 10.9 percent in January, the biggest drop in seven years, as Americans' worries about the nation's economy overwhelmed the attraction of cheaper mortgage rates.
The Commerce Department reported Tuesday that sales of new single-family homes declined last month to a seasonally adjusted annual rate of 921,000. That followed a 14.9 percent rise in December, which pushed sales to a record monthly rate of 1.03 million.
``Despite very good financing conditions _ mortgage rates in January averaged close to 7 percent _ you've got the confidence problem, which is deepening, and is cutting into sales. We've been worried about that particular tug of war for a couple of months,'' said David Seiders, chief economist for the National Association of Home Builders.
January's 10.9 percent drop was the biggest since January 1994, when new-home sales plunged by 23.8 percent.
The performance was much weaker than the 5.4 percent decline many analysts were forecasting.
Federal Reserve Chairman Alan Greenspan has said a big factor in whether the flagging economy slips into recession is how consumer confidence holds up during the slowdown.
Consumer confidence fell for the fourth month in a row in January, hitting its lowest level in four years.
Economists said that slumping confidence, stock market volatility, higher energy prices and slower job growth, all translated into January's new-home sales decline.
While other parts of the economy, notably manufacturing, have been hurt seriously by the sharp economic slowdown, the housing market has managed to stay afloat, in large part because of cheaper mortgage rates.
In January, the average interest rate on a fixed-rate 30-year mortgage was 7.03 percent, down from 7.38 percent in December. In recent weeks, however, mortgage rates have edged up. Last week, the average rate on a 30-year mortgage rose to 7.12 percent.
All regions of the country reported a decline in new-home sales last month.
The West posted the largest drop of 18.7 percent to a seasonally adjusted annual rate of 261,000. Sales in the Northeast plunged by 18.5 percent to a rate of 53,000. In the Midwest, sales fell by 7 percent to a rate of 160,000 and in the South, they declined by 6.3 percent to a rate of 446,000.
The median sales price, the midpoint where half the homes sold for more and half for less, rose by 7.1 percent in January to $169,800 from December. The average price, however, fell by 1 percent to $206,100.
On Monday, the National Association of Realtors reported that sales of previously occupied homes fell for a second straight month by 6.6 percent. That pushed January's sales down to a seasonally adjusted annual rate of 4.65 million.
Industry officials called for the Federal Reserve, which cut interest rates twice in January, totaling a full percentage point, to continue to aggressively lower rates to make sure the interest-rate sensitive housing market doesn't seriously falter.