Washington, DC, Oct. 28‹Sales of new homes rose 0.4% in September while sales of existing home were up by 1.9% as the lowest mortgage rates in decades kept the housing industry on track for a record year.
According to the Commerce Department, sales of new single family homes rose to a seasonally adjusted annual rate of 1.021 million last month, the highest rate on record, surpassing the old record of 1.017 million set in August. The increase was led by a surge in sales in the Northeast.
In a separate report, the National Association of Realtors said that sales of existing homes were up an even stronger 1.9% in September to an annual rate of 5.40 million units.
Based on results in the first ten months of this year, economists are predicting that 2002 will be the best year in terms of sales of both new and existing homes in history.
The housing boom has been fueled by the lowest mortgage rates since the 1960s as the Federal Reserve, trying to jump start an economy hit by a recession last year and this year's uncertain recovery, has kept interest rates at a 40 year low.
Those low rates have fueled not only a boom in home sales but strong demand for new cars as auto makers have been able to lure customers into showrooms with attractive zero interest financing deals.
The low rates have also sparked record levels of mortgage refinancing, saving consumers millions of dollars in monthly mortgage payment costs, money they have been able to use to bolster consumer spending.
According to a nationwide survey by Freddie Mac, mortgage rates rose last week with the average interest rate on 30 year mortgages climbing to 6.31%. The previous week, 30 year mortgages had dipped to 5.98%, the sixth time this year that rates had hit a new record low according to the Freddie Mac survey which goes back to 1971.
Analysts believe that given possible action by the Fed and the weak economy, rates should remain at fairly low levels for the rest of this year.
The 0.4% rise in new home sales followed an even bigger 6.8% gain in August.
By region of the country, new home sales in the Northeast were up the most, a whopping 94.2% surge to an annual sales rate of 101,000 homes. Sales were also up 2.2% in the West to an annual rate of 278,000 units. Sales fell by 8.6% in the South, dropping to an annual rate of 456,000 units. Sales were also down in the Midwest, falling by 4.1% to an annual rate of 186,000 units.
The 1.9% September increase in existing home sales over the August sales pace was led by an 8.9% jump in sales in the Midwest, which rose to an annual rate of 1.22 million units. Existing home sales were up 2.3% in the South to a rate of 2.18 million. But in the Northeast, existing home sales dipped by 1.6% to a pace of 620,000 and they were down 3.5% in the West to an annual rate of 1.37 million.
The median price of an existing home sold in September was $159,000, up 7.9% from the same month a year ago.
