|
New home sales soar
|
 |
September 30, 1999: 3:00 p.m. ET
Buying spree continues in August, prompting concern of still higher rates
|
NEW YORK (CNNfn) - New home sales surged in August to the second-highest level ever, a government report showed Thursday, suggesting rising borrowing costs aren't slowing the prolific U.S. housing boom.
The number of new single-family homes sold rose to a seasonally adjusted annual rate of 983,000 in August, up 2.9 percent from July's revised rate of 955,000, the Commerce Department said. July's home sales originally were reported at 980,000. The numbers were just 2,000 shy of the monthly record rate of 985,000 homes last November.
The report indicates the U.S. housing market remains red hot despite two interest rate rises by the Federal Reserve in recent months, a pickup in bond yields, and a corresponding rise in mortgage rates. Even so, some economists believe the market will slow in the months ahead, reflecting a drop in demand for new mortgage applications.
"Looking forward, we can be unequivocal: New home sales have to fall, because the level of demand for new mortgages for house purchase recently has not been sufficient to sustain current sales rates," said Ian Shepherdson, senior U.S. economist with High Frequency Economics. He's predicting sales will head back toward the 900,000-level in September or October.
Mortgage rates up
Indeed, mortgage rates are up almost a full percentage point since last November, reflecting higher official lending rates and rising bond yields. Mortgage rates and bond yields tend to move in tandem as banks borrow at a lower rate from the bond market, then profit from the higher rates they charge consumers.
And applications for new mortgages are down; the Mortgage Bankers Association of America's weekly mortgage applications index has fallen 41 percent since January, suggesting fewer people are applying for new mortgages.
Still, other economists see the robust housing market coupled with other reports showing sustained job growth and economic activity as an indication that consumer spending still hasn't eased, which may prompt the Fed to raise rates again to slow the economy and ensure that inflation remains in check.
"The overall affordability of a home is still ample," Alan Levenson, chief economist with T. Rowe Price in Baltimore, told CNNfn. "It will probably mean we'll need more restraint by the Fed going forward." He expects GDP could ring in "in excess of 4 percent" in the third quarter. Second-quarter growth was 1.6 percent.
Analysts and economists had been hoping the housing market, a driving force behind consumer spending, would slow, reducing the need for another economy-slowing interest rate rise by the Fed. The Fed's Open Market Committee meets next week to decide whether to raise its trend-setting interest rate for the third time this year.
Prices up, too
The Commerce Department said the median price of new homes fell to $150,800 from $157,000 in July. The average price rose to a record $198,300 from $188,200 the previous month.
The supply of new homes dropped to 3.9 months -- a low level signaling robust demand -- compared with a 4-month supply in July.
Single-family home sales rose in all areas of the country except the South, where sales dipped to an annual pace of 414,000 units, 8.2 percent lower than July's rate.
Sales in the Northeast were 16.9 percent higher in August at a 104,000 annualized pace while sales in the Midwest shot up 15.2 percent to a pace of 197,000. Sales in the West gained 10.3 percent to 268,000 units.
-- from staff and wire reports
|
|
|
|
|
|
Commerce Department
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
