Investment propertyNew Home Sales Decline for Second Straight Month
The other shoe has finally dropped on the housing industry, as new home sales
finally declined a bit after several consecutive months of increases that
defied expert predictions.
New home sales slipped for the second consecutive month in January, but
nevertheless remained exceptionally strong, implying that higher interest rates
might be starting to take some sizzle out of housing markets.
Americans purchased new homes at a seasonally adjusted annual rate of 918,000,
down 5 percent from 966,000 in December, the U.S. Census Bureau reported.
The sales rate, despite the 5% decline, nevertheless was the third highest on
record. Sales topped 1 million in November, the most since the government began
tracking them in 1963.
Mortgage rates have begun to edge up recently, sapping one of the most potent
influences that sent construction and sales soaring in 1998.
Three interest-rate cuts by the Federal Reserve late last year fostered sales
by bolstering stock prices and driving consumer optimism up.
But in recent weeks, long-term interest rates have been edging upward amid
unease about future Fed rate moves, with 30-year mortgage rates topping 7
percent for the first time in months.
Bond prices moved up moderately after the release of the housing data. A
cooldown in housing markets from last year"s sky-scraping highs might encourage
the U.S. central bank to hold off on interest-rate rises if it appeared the
economy was slowing on its own.
``The inventory number shows that there is really no shortage of homes. I would
think builders would want to err on the cautious side and slow down building,""
said Robert Barr, senior economist at Fannie Mae.
Despite the back-to-back monthly declines in December and January, sales in
January remained 8.3 percent above the pace a year earlier -- January 1998 --
when new homes were moving at a rate of 848,000 a year. The Commerce Department
said that January was the 38th month in which new homes were selling at a rate
of 700,000 or more, setting a record.
With mortgage rates remaining under 7 percent and jobs plentiful, at least so
far this year, most economists expect strong new home sales in 1999, just not
quite as strong as the record 887,000 for all of 1998.
Regionally, the Midwest posted the worst drop -- 25 percent, the most since
September 1996, to a seasonally adjusted annual rate of 133,000. It was
followed by the Northeast, down 7.2 percent to a rate of 77,000, and the South,
down 3.7 percent to a rate of 437,000. Sales rose 8 percent in the West to a
rate of 271,000.
The decline in sales means new homes are somewhat more available nationally, in
proportion to the number of buyers. The inventory of unsold homes at the end of
the month was 302,000, the most in two years. That"s a four-months supply at
the current sales rate, up from 3.8 months in December.
The median price of a new home -- meaning half sold for more and half for less
-- was 157,000 in January, up 6.1 percent from a year earlier.
Last week, the National Association of Realtors reported that Americans
purchased existing homes at a record seasonally adjusted rate of 5.07 million
in January.