Low rates lead to 9.4% rise in sales of new homes

Increase is biggest since 2000

top gains were in South and West

September 28, 2004|By BLOOMBERG NEWS

WASHINGTON - New-home sales rose 9.4 percent last month, the biggest gain since the end of 2000, the Commerce Department said yesterday, as homebuyers continued to take advantage of interest rates of less than 6 percent.

Single-family new-home sales increased to an annual pace of 1.184 million last month, led by surging sales in the West and South.

Increased sales and a decline in the supply of homes might add to builder backlogs and underpin construction through the end of the year, contributing to economic growth.

Borrowing costs fell last month even though the Federal Reserve raised the nation's benchmark lending rate.

August's average 30-year fixed rate fell to 5.87 percent, the lowest since March, according to data from Freddie Mac, the second biggest buyer of mortgages. The rate reached a record low of 5.21 percent last year. The average rate over the past 10 years was 7.63 percent, Freddie Mac said.

"We've seen consistently good sales" for a number of years, said Joel H. Rassman, chief financial officer of Toll Brothers Inc. of Huntingdon Valley, Pa., the largest U.S. builder of luxury homes.

"Every home we have is sold before it's built. This is a very strong market with demand so far greater than supply."

If Toll didn't sell a home for the next 30 days, it would still take 11 months to fill existing orders, he said. "Not only do we have the rest of this year in the bag, but we have most of next year," he said.

About 1.16 million new homes will be sold this year, according to a National Association of Realtors forecast, surpassing the record 1.085 million last year. Sales rose to a record annual pace of 1.283 million in May, government data show.

Sales of new homes increased in three of four regions. They rose 6.1 percent in the Northeast, 13 percent in the South and 20 percent in the West. Sales fell 8.3 percent in the Midwest.

The median selling price declined to $208,900 from $214,400 in July, reflecting a greater percentage of homes built for less than $125,000, the Commerce Department said. Prices are 9.7 percent higher than at the corresponding time last year.

The inventory of new homes for sale dropped to a 4.2-month supply last month from 4.4 months in July, while the number of new homes for sale rose to 404,000, the most since October 1979.

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