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Archive for Friday, May 25, 2001

New-home sales post biggest drop in 4 years

May 25, 2001

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— Americans bought fewer new homes in April as worries about job security helped push sales down by the largest amount in four years.

Sales of new single-family homes fell by 9.5 percent to a seasonally adjusted annual rate of 894,000, the biggest drop since April 1997, the Commerce Department reported Thursday.

In another government report, the number of Americans filing new claims for state unemployment insurance last week rose sharply, fresh evidence that the weakening economy is making it harder for workers to hold onto their jobs.

The Labor Department said new claims for jobless benefits jumped by a bigger-than-expected 15,000 to a seasonally adjusted 407,000 for the work week ending May 19.

Economists linked the decline in new-home sales to the worsening labor market and last month's big drop in consumer confidence, which underscored increasing fears among Americans about their jobs and the economy.

But even with last month's drop, new-homes sales remain at healthy levels, economists said.

The annualized level of 894,000 posted in April "is still above the average level of the past three years," said David Seiders, chief economist at the National Association of Home Builders. He said that new-home sales averaged 885,000 in 1998, 880,000 in 1999 and 877,000 in 2000.

In April, the average rate on a 30-year fixed-rate mortgage was 7.07 percent, down from 8.20 percent in April 2000.

But "slowing job and income growth is offsetting lower rates," said Karen Dexter, a Merrill Lynch economist.

By region, sales in the Northeast fell by 6.3 percent to an annual rate of 75,000 in April. In the Midwest, they declined by 10.9 percent to a rate of 164,000. In the South they fell by 13.1 percent to a rate of 437,000 and in the West sales slipped by 1.4 percent to a rate of 218,000.

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