WASHINGTON – Sales of new homes rose 0.4 percent in September , the government said on Friday, as the lowest mortgage rates since the 1960s kept the country on track for a record year for home sales.
Sales of new single-family houses climbed 0.4 percent to a seasonally adjusted annual rate of 1.021 million units last month from an upwardly revised 1.017 unit pace in August, the Commerce Department said.
The sales performance was stronger than economists had expected. Wall Street had looked for the sales rate to slip to 991,000 units from the previously reported 996,000 homes rate in August.
Based on results in the first 10 months of this year, economists are predicting that 2002 will be the best year in terms of sales of both new and existing homes in history.
The housing boom has been fueled by the lowest mortgage rates since the 1960s as the Federal Reserve, trying to jump-start an economy buffeted by a recession last year and this year's uncertain recovery, has kept a key interest rate it controls at a 40-year low.
In a separate report Friday, the National Association of Realtors said that sales of existing homes also rose in September, up 1.9 percent to a seasonally adjusted annual rate of 5.40 million. Sales of existing homes are also on track to set a record this year.
The Fed's gift of low interest rates has fueled not only a boom in home sales but strong demand for new cars as auto makers have been able to lure customers into showrooms with attractive zero interest financing deals.
The low rates have also sparked record levels of mortgage refinancings, saving consumers millions of dollars in monthly mortgage payment costs, money they have been able to use to bolster consumer spending.
Even with all of spur to demand, the economy has continued to struggle this year to mount a sustainable recovery from last year's recession as businesses, hit by corporate accounting scandals and plunging stock prices, have been reluctant to rehire laid off workers or boost their spending on new factories and equipment.
Many economists believe that the Fed may decide in the face of these drags on economic activity to reduce rates further when policy-makers next meet on Nov. 6. It has kept its key overnight lending rate, the federal funds rate, at a 40-year low of 1.75 percent since last December.
According to a nationwide survey by Freddie Mac, mortgage rates did rise this week with the average interest rate on 30-year mortgages climbing to 6.31 percent. The previous week, 30-year mortgages had dipped to 5.98 percent, the sixth time this year that rates had hit a new record low according to the Freddie Mac survey which goes back to 1971.
Analysts beleive that given possible action by the Fed and the weak economy, rates should remain at fairly low levels for the rest of this year.
The 0.4 percent rise in new home sales followed an even bigger 6.8 percent gain in August.
By region of the country, new home sales in the Northeast were up the most, a 94.2 percent surge to an annual sales rate of 101,000 homes. Sales were also up 2.2 percent in the West to an annual rate of 278,000 units.
These gains helped to offset declines in other parts of the country. Sales fell by 8.6 percent in the South, dropping to an annual rate of 456,000 units. Sales were also down in the Midwest, falling by 4.1 percent to an annual rate of 186,000 units.