New home sales posted a seasonally adjusted annual rate of 880,000 in October, a 0.2 percent gain from the upwardly revised September rate of 878,000, the Commerce Department reported today.
"These strong housing numbers reflect October's average monthly 30-year mortgage interest rates, just above 6.5 percent, which were essentially the lowest rates since the 1960s," said Bruce Smith, president of the National Association of Home Builders and a home builder from Walnut Creek, Calif. "Consumers responded to these very favorable mortgage rates, despite the overall weakness in the economy and the continued economic fallout generated by the events of Sept. 11."
Although housing remains the bright spot in an otherwise sluggish economy, Smith cautioned that a number of factors, including mounting unemployment, lackluster consumer confidence and rising mortgage rates that have now crept back up to 7 percent, could dampen demand in the final quarter of 2001.
"We expect to see a modest housing slowdown going into the beginning of next year, but when you compare this to past economic cycles, this is quite mild," Smith said. Even with the anticipated slowdown, he noted that home sales in 2001 should surpass last year's mark of 877,000 units and come in, "around record levels" of 888,000.
Housing and related industries and activities, which account for close to 20 percent of the Gross Domestic Product, are critical to the overall performance of the economy. "Thanks to a strong demographic demand for housing, the record accumulation of home equity during the last decade and the current refinancing boom, which has poured billions of dollars back into the economy, housing should continue to help ease the effects of the current economic slowdown," Smith said.
Regionally, October new home sales rose 15.8 percent in the Northeast, 1.4 percent in the South and 3.3 percent in the West. Sales declined by 11.7 percent in the Midwest. The month's supply of homes for sale remained constant at 4.3.