Newspaper article THE JOURNAL RECORD

Sales of New Homes Reach Six-Month High in September

Newspaper article THE JOURNAL RECORD

Sales of New Homes Reach Six-Month High in September

Article excerpt

WASHINGTON _ Sales of new homes rose to a six-month high in September, despite rising mortgage rates.

Analysts attributed the resiliency to economic growth, fears of even higher rates in the months ahead, a shift to cheaper adjustable-rate mortgages and a realization that homes still are affordable compared to the double-digit mortgage rates of much of the 1980s.

"Of those, the first is most important," said David Berson, an economist with the Federal National Mortgage Association, who cited recent job and income growth.

"People feel confident about the future," he added. "That's the most important reason why they buy homes."

But sales were mixed, rising sharply in the Northeast and in the South while falling in the Midwest and West.

And Berson and others believe the overall housing sector will weaken slowly in the months ahead _ although without collapsing _ as the Federal Reserve continues to engineer interest rate increases to restrain inflation.

Fed policymakers already have nudged rates up five times this year, and most analysts believe they will tighten credit a sixth time at their mid-November meeting.

"The report clearly supports a Nov. 15 firming of monetary policy," said economists at Donaldson, Lufkin Jenrette Securities Corp. in New York.

In a report Thursday, the Commerce Department said new home sales rose 2.6 percent to a 703,000 seasonally adjusted annual rate, highest since 722,000 last March. It was the third straight gain.

But at the same time, Commerce revised the August sales increase, to a 685,000 rate from its original 703,000 estimate.

Because of fixed-rate, 30-year mortgages that averaged 8.68 percent, up from a 25-year low of less than 7 percent a year ago, many analysts had predicted declining sales in September.

The Federal Home Loan Mortgage Corp. reported Thursday that rates continued to climb this week, rising to 9. …

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