Sales of New Homes Hit Lowest Level in 5 Years

WASHINGTON â€”  Sales of new homes slumped 9.6% in December, the government reported today, helping to drag sales in 1989 to their lowest level in five years.

The Commerce Department said new single-family homes were sold at a seasonally adjusted annual rate of 629,000 units in December after rising a revised 9.3% in November. November sales originally were reported up 9.6%.

For the year, sales were down 3.8% from 1988. Sales in 1989 were the lowest since 639,000 units were purchased in 1984. Analysts have cited high mortgage interest rates for much of the decline.

But they had been looking for improving home sales as mortgage interest rates declined. Rates had risen last year as a result of Federal Reserve efforts to drive down inflation by tightening credit.

Fixed-rate mortgages averaged 9.78% at the end of December, according to a survey by the Federal Home Loan Mortgage Corp. They had peaked at 11.22% last March.

Unusually cold weather may have hurt December new home sales. The National Assn. of Realtors last week blamed the severe weather in part for a 1.1% decline in sales of existing homes last month.

But mortgage rates also were blamed for cutting sales of existing homes to 4.6% less than in 1988.

The Commerce Department reported that the median price of a new home in December rose 4.1% to $130,100, and 6.7% to $121,000 for the year. The median means that half of the homes cost more, half less.

On the other hand, the average price of a home in December rose 5.1% to $159,800. It was up 8% to $147,700 for the year.