Friday, January 07, 2000
New-home sales fall, as prices climb 5.3%
Bloomberg News
WASHINGTON — U.S. new-home sales fell more than expected in November as mounting interest rates slowed purchases in every region and prices reached their highest ever, Commerce Department figures showed Thursday.
New-home sales fell 7.1 percent in November, to 865,000 units, at a seasonally adjusted annual rate, the largest decline in almost two years. At the same time, the median price of a new house increased 5.3 percent, to a record $167,400. The supply of unsold homes rose to its highest since May 1997.
“It looks like the housing market has finally peaked,” said Joel Naroff, president of Naroff Economic Advisors in Holland, Pa. “The jump in home prices is a clear warning that inflationary pressures are building in the economy.”
November sales were down 12.2 percent from the record pace of 985,000 units a year earlier, when conventional mortgage rates were almost a full percentage point lower. That decline was the biggest since a drop of 17.5 percent in the year ending March 1993, according to Bloomberg analytics.
Even with the November decline, new-home sales were still on pace to set a record in 1999 at 911,000 units, compared with the previous high of 886,000 homes in 1998. No comparable figures are available for Greater Cincinnati.
New-home sales this year are expected to fall 5.8 percent, to 881,000 units, according to the National Association of Home Builders.
Conventional mortgage rates have risen in every week but one since Federal Reserve policy-makers increased the overnight bank lending rate Nov. 16 to 5.50 percent, the third increase in 1999. This week, the average rate on the benchmark 30-year, fixed-rate mortgage returned to 8.15 percent, a two-year high set in August, according to U.S. mortgage buyer Freddie Mac. Investors expect the Fed to raise its target interest rate in February.
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