Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, December 31, 1994 TAG: 9501030035
SECTION: BUSINESS PAGE: A-6 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
``It's clear this is the beginning,'' said economist David Lereah of the Mortgage Bankers of America. ``The housing sector is slowing.''
Joseph Blalock, an economist with the Savings & Community Bankers of America, agreed, saying that a slower economy next year also will contribute to fewer homes sold.
Housing is one of the most interest-sensitive sectors of the economy. Many other areas have yet to feel the effects of six interest rate increases by the Federal Reserve this year to slow economic growth and avoid any major escalation of inflation.
The U.S. Chamber of Commerce, for instance, said Friday that its business-confidence index shot up to 65.2 in December, the highest since its inception in May 1990.
``On the economic front, businesses responded favorably to the robust but noninflationary growth in the economy and the current indications of a strong Christmas season,'' said chamber economist Martin Regalia.
The chamber said its bimonthly survey found sizable jumps in economic outlook and in sales and employment expectations.
But new home sales fell 2.5 percent in November to a seasonally adjusted annual rate of 693,000, down from a revised 711,000 in October, the Commerce Department said Friday. It was the first decline since sales plunged 9.2 percent last June.
The report also showed that the housing market was much weaker than previously thought in August, September and October. The October rate, for instance, originally was estimated to be 726,000.
Many analysts had been predicting a housing slowdown for months as mortgage rates lurched upward.
Fixed-rate, 30-year mortgages averaged 9.18 percent in November, up from 8.93 percent in October and 7.15 percent last February, when the Fed began raising rates, according to the Federal Home Loan Mortgage Corp.
A jump from 7 percent to 9 percent would add $209 to the monthly payment on a $150,000 mortgage.
Michael Carliner, an economist with the National Association of Home Builders, predicted new home sales will total 645,000 in 1995.
Although that would be down from an estimated 675,000 this year, it would be well above the recession levels of 534,000 in 1990 and 509,000 in 1991.
A seasonally adjusted 336,000 new homes were for sale in November, the largest number since 339,000 in September 1990. That represented a supply of 6.0 months at the current sales rate, up from 5.7 months in October.
The median price was $128,700, compared with $130,000 both in October and in November 1993. The median is the midpoint, meaning that half of the homes cost more and half cost less.
by CNB