THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Wednesday, August 31, 1994 TAG: 9408310451
SECTION: BUSINESS PAGE: D2 EDITION: FINAL
SOURCE: BY JAMES H. RUBIN, ASSOCIATED PRESS
DATELINE: WASHINGTON LENGTH: Medium: 51 lines
New-home sales rebounded in July, but analysts said the trend is for slower growth in a sector of the economy that is particularly sensitive to rising interest rates.
July's new-home sales surged 8.3 percent, the government said Tuesday, and the rates for May and June also were revised upward. Still, the June level was a 15-month low, and the July sales were still well below December's peak.
``The July rebound is making up some ground, given the huge drop in June,'' said economist Robert Dederick of the Northern Trust Co. in Chicago. ``The basic message is we've passed over the top of the market and we've begun to descend. But there's no reason to believe it will be precipitous.''
Also Tuesday, the Conference Board said its widely followed survey showed that consumer confidence in the economy has dropped for the second straight month in August. The index fell to 89.0 from a revised reading of 91.3 in July and 92.5 in June. June's was the highest level in four years.
Most analysts agreed that the five increases in interest rates by the Federal Reserve since February are taking a toll on the housing market.
Sales of new homes, which fell a revised 11.4 percent in June, totaled a seasonally adjusted annual rate of 664,000 in July, said the Departments of Housing and Urban Development and Commerce.
All regions of the country except the Midwest took part in last month's recovery, which most analysts predicted.
The June rate was revised to 613,000, up from an initial estimate of 591,000. Still, the higher figure was the lowest level since March 1993, when the rate was 600,000.
Fixed rate 30-year mortgages averaged 8.62 percent in July, up from 8.43 percent in June and 8.6 percent in May. Rates averaged 8.56 percent last week.
This year's nearly 2 percentage point increase adds about $200 to the monthly payment on a $150,000 mortgage.
Some analysts said the greater availability of adjustable rate mortgages is blunting the impact of higher rates by allowing buyers to pay less in the first years of new home ownership.
The July rebound also may have been helped by a drop in prices. The median - or midpoint - price of a new home declined to $123,000, down 6.1 percent from $131,000 in June.
KEYWORDS: HOUSING STARTS by CNB