Newspaper article St Louis Post-Dispatch (MO)

U.S. Home Sales Fall, but Builders Busy Here

Newspaper article St Louis Post-Dispatch (MO)

U.S. Home Sales Fall, but Builders Busy Here

Article excerpt

Sales of new houses fell to a two-year low nationally in June, while the St. Louis market showed only slight signs of weakening.

Sales of new houses dropped 14.1 percent in the United States, the government said, as high mortgage rates muffled America's house-building boom.

The nationwide sales dip adds to evidence that the American economy is slowing in response to the Federal Reserve's decision to push up interest rates last spring.

Housing is taking the brunt of that policy.

"The housing sector, which had been a source of strength for the economy, is turning into a drag," said David Seiders of the National Association of Home Builders.

Mortgage interest rates rose from from a 25-year low of 6.8 percent in October to 8.6 percent in June. That would add about $120 to a monthly mortgage payment of $657 on a $100,000 loan.

In St. Louis, builders are still working on a backlog of new house orders placed last spring.

Builders here measure progress by building permits, not sales, and permits are rising. Builders here put up 954 single- and multi-family units in June. That was up from 767 in May and 754 in June of 1993.

So far this year, new house permits are up 33 percent from last year.

But builders usually don't take out a permit until they're ready to break ground. The sale may have been made months earlier, and that makes it hard to tell if St. Louis sales followed the downward trend of the nation.

In one sign of a slowdown, somewhat fewer St. Louisans seem to be taking out mortgages. "There's no question it's slowed our industry," said Al Will, vice president at Gershmann Investment Co., one of the region's biggest mortgage lenders.

People with low rates on their old homes seem reluctant to pay higher rates for new houses, said Will. It could take a year for people to become reconciled to paying higher rates in order to buy a better house, he said.

Existing home sales are still ahead of last year, but show some signs of slowing. The St. Louis Association of Realtors says 1,770 existing homes sold here in June, compared to 1,684 in the same month a year ago.

"In the second half of June, everyone experienced a certain sluggishness," said Connie Alderfer, president of the Realtors group. …

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