Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.ibd From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: \TITLE Date: Mon, 2 Nov 92 13:00:39 EST Message-ID: <9.1992Nov2.130040@AmeriCast.com> 11/2/92 TITLE #m#ak/tlj#m#New-Home Sales Dropped 1% In September But That Was Affected By Upwardly Revised August Data Robert Cor- rigan New-home sales fell 1% in September, breaking a string of four straight gains, the Commerce Department reported Friday. But the decline was deceptive, and economists and construction executives were encouraged by the underlying numbers. Compared with a year earlier, sales were up 24%. Sales in the month to- taled a seasonally adjusted annual rate of 617,000 units, down from August's rate of 623,000 units, which was revised sharply upward from earlier estimates. August's rate originally had been reported at a 570,000-unit rate, or a hefty 6.1% loss compared with the month before. But the revised number represented a 1.6% gain. If August's rate had not been revised, a 7.6% gain would have been reported for September instead of the 1% loss. "I would regard this as a pretty good report for new-home sales be- cause of the very large upward revision to the August figure," said Mark Obrinsky, senior economist at the Federal National Mortgage Association in Washington. Samuel Kahan, chief economist at Fuji Securities Inc. in Chicago, noted that preliminary new-home sales numbers are often unreli- able. Friday's report "again underscores the volatility of this series. It once more tells people to be cautious about jumping on the first number reported," he said. The initial estimates of new-home sales by the Commerce Department have been revised shar- ply upward in 12 of the last 13 months, as additional information became available. Despite September's one-percentage-point dip, new-home sales have trended higher in the last half year, giving home builders hope that a true recovery for the housing sector is under way. The government's housing-starts report for New-Home Sales Dropped 1% In September September also showed a gain, marking steady upward movement since last April. Existing-home sales, however, remain in the dumps. Resales for September were down 1% to the lowest level in eight months. Laurence E. Hirsch, chief executive of Dallas- based Centex Corp., said the latest housing indicators make him "cautiously bullish." He said large builders such as Centex con- tinue to gain from the consolidations taking place in the market. Some larger companies continue to snap up market share from smaller competitors unable to stay in business through the reces- sion. Numbers Show Improvement Like many big builders, Centex is showing sharply better numbers. Sales increased about 60% in the quarter ended Sept. 31 compared with the same period the year before, Hirsch said. He noted that California continues to be a drag on the rest of the nation, as prices on new homes fall in some areas and sales remain weak. Indeed, in Friday's report, the West region again posted a lower sales number, falling 8.4% from August. California dominates the 13-state West region, usually accounting for more than 60% of sales there. The Northwest ran up a hefty gain, leading the country, while the South had a small advance. Sales fell in the Midwest. Kahan said September's relatively healthy nationwide number indicates that lower mortgage rates are finally helping sell homes. The average rate on 30-year fixed-rate mort- gages in the month was 7.72%, the lowest monthly average in 19 years. Since September, however, rates have moved higher in tan- dem with the bond market, which is concerned about the economic stimulus program promised by Democratic presidential candidate Bill Clinton. Last week, the Federal Home Loan Mortgage Corp. said the average interest rate for a 30-year fixed mortgage stood at 8.21%, down from 8.23% the week before but up almost half a percentage point from September's average. J. Ronald Terwil- liger, managing partner of Trammell Crow Residential in Atlanta, said consumers' lack of confidence is still keeping the housing market back. He said the word hasn't gotten out that rates are low, prices are declining and the economy still has several bright spots. "Technically, we're in a recovery, with six straight quarters of growth. But the press has been hurting con- sumer confidence by not telling the whole story," he said. Terwilliger also noted that lower inventories of new homes and prepared lots bodes well for the industry in the quarters ahead. At the end of September, the seasonally adjusted estimate of new houses for sale was 267,000, representing a supply of 5.3 months at the current sales rate. That compares with 6.2 months as re- cently as April, and is consistently lower than supply numbers in the last few years. Regionally, sales plunged 14.4% in the Midwest, to a rate of 113,000 units. They were off 8.4% in the West, to a 153,000-unit rate. In the Northeast, sales surged 25.3% to a 94,000-unit rate, the biggest increase since they rose 34.9% in October 1989. Sales were up 3.6% in the South, to a 257,000- unit rate. Consumers Still Cautious Consumers' concern about purchasing big-ticket items has forced many buyers this year to seek less expensive alternatives. As a result, sales of manufactured homes are up sharply and account for a large number of new dwellings constructed in the U.S. As of August, year-to-date shipments of manufactured homes were up 16.2% compared with the same period the year before, according to the Manufactured Housing Institute in Arlington, Va. At this rate, about 190,000 manufactured homes should be sold by the end of the year, according to Joe Owens, an MHI official. Increased sales in the South due to the damage caused by Hurricane Andrew are not likely to take hold until December or early next year, said Chris Busky, MHI controller. New building codes have not been agreed on yet by the Housing and Urban Development Depart- ment, slowing production, he said. This article is copyright 1992 Investors Business Daily. Redis- tribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM