Originally created 03/03/00

Rising rates hurt home sales



New-home sales across the United States plunged by 4.2 percent in January as higher mortgage rates cut into demand.

Area builders and real estate agents said they have noticed a slight decline in new housing demand although business is still strong.

"This winter has been a little slower than last, but it's nothing to be real concerned about," said Tom Werner, president of Pierwood Construction and past president of the Builders Association of Metro Augusta.

Builders are beginning to feel the effects of interest rate increases last fall, he said.

Federal Reserve policy-makers have raised interest rates four times since June in an attempt to cool the nation's roaring growth and hedge against inflation. They are expected to increase rates again at a meeting March 21.

The average rate on a 30-year fixed-rate mortgage was 8.21 percent in January, compared with 7.91 percent in December.

Americans purchased new single-family homes at a seasonally adjusted annual rate of 882,000, the lowest level since March 1999, the Commerce Department reported Thursday.

The drop was bigger than the 1.1 percent decline many analysts were forecasting. In December, new-home sales rose 4 percent.

January new-home sales were down in all parts of the country except for the Northeast, where they rose.

Sales in the Midwest took the biggest plunge, falling 8.7 percent in January to a seasonally adjusted annual rate of 137,000 units. In the West, sales fell by 7 percent to a rate of 238,000 units, and in the South they were down by 2.8 percent to a rate of 415,000. But in the Northeast, sales rose 5.7 percent to a rate of 93,000.

The median price of a new home -- meaning half sold for more and half for less -- fell to $154,400 in January, down 5.9 percent from December's price.

A report last week showed higher mortgage rates took a bite out of existing-home sales, pushing them down by 10.7 percent in January, the National Association of Realtors said.

Jim Courson, president of Coldwell Banker/Courson Realty and the Greater Augusta Association of Realtors, said the threat of higher rates may generate additional sales activity.

"I think what has happened is the people on the fence are going to start making a decision," he said.



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