New-home sales decline, along with confidence

WASHINGTON — WASHINGTON -- Ending a pre-election week in which a stream of economic indicators continued to point to stunted recovery, the Commerce Department reported yesterday that new-home sales fell slightly in September, and non-government agencies found consumer confidence and Chicago-area industrial activity eroding in October.

The findings, said Edward F. McKelvey, a senior economist at Goldman, Sachs, are "consistent with a very sluggish economy."


Yesterday's report, like Tuesday's superficially optimistic report on national output, required close inspection.

Home sales edged down 1 percent, to an annual rate of 617,000, last month, the Commerce Department said. Increases in the Northeast and South were more than offset by declines in the Midwest and West.


This, however, was accompanied by a sharp upward revision for August, one that transformed what had been a 6.1 percent drop into a 1.6 percent advance. This change, based on new data, suggested to some that housing activity probably bottomed last spring, but analysts cautioned against expecting large gains.

"At best we're going to flounder at this level," said Samuel D. Kahan, economist for Fuji Securities in Chicago. He noted that mortgage rates had been rising for weeks and that some potential home buyers might want to delay, pending possible resubmission of legislation that would provide a tax break.

Mr. McKelvey added that prospects did not seem bright if the lowest borrowing rates in 20 years did not generate more than about 600,000 sales.

The sales figures suggest annual housing starts, which include the dormant apartment sector, of little more than 1 million. The National Association of Home Builders has been projecting a 10 percent rise in 1993, to 1.32 million.

The biggest September sales gain was in the Northeast, where the annual sales pace spurted 25.3 percent, the most since October 1989. Unit volume, which rose to an annualized sales rate of 94,000 in September from 75,000 in August, was still the lowest of the four regions.

As for consumer attitudes overall, the University of Michigan said its Index of Consumer Sentiment slipped to 73.3 in October, virtually unchanged from its midmonth estimate; September's figure was 75.4. This was the fourth straight monthly decline, matching the drops in the Conference Board's consumer confidence survey published Tuesday.