INTEREST RATES HURT U.S. MAY HOUSING SALES
Sales of new single-family homes
tumbled 14.9 pct in May from April levels because of higher
mortgage interest rates, analysts said.
    "There should be another month or two of very weak new home
sales but with interest rates stabilizing, sale of new homes
should become more stable by mid-summer," said economist
Lawrence Chimerine of Wharton Econometrics Inc.
    The drop in May, to a seasonally adjusted annual rate of
616,000 units, was the largest since January 1982, the Commerce
Department said.
    Interest rates on conventional mortgages bottomed out at
about 9.08 pct in March and rose to about 10.7 pct in April,
according to Stephen Roach, economist at Morgan Stanley.
    The effect was to freeze some potential new homebuyers out
of the market, he and others said.
    "The rates moved very suddenly and were certainly
unexpected by homebuyers," said Cynthia Latta, an economist
with Data Resources. "They were so startled, they wanted to
hold back and see what would happen."
    The drop in sales of new single-family home sales was
sharper than expected, some economists said. "We fully expected
a decline but the extent was more than we anticipated," said
James Christian, chief economist for the U.S. League of Savings
Institutions.
    Christian said there was a sharp rise in May in sales of
existing homes, which are generally less expensive than new
homes.
    Latta of Data Resources said strong sales of new
condominiums in the Northeast and on the West Coast were
reflected in sales of existing but not new homes.
    Christian of the U.S. League of Savings Institutions said,
"Underlying housing demand remains strong. I think the market
is going to stabilize and give us a good second half."
    Others were less optimistic, however.
    "We clearly won't have a boom (in new home sales) but I
don't think this is the start of a collapse in single-family
housing," said Chimerine of Wharton.
    Eugene Sherman, chief economist of the Federal Home Loan
Bank of New York, said, "The lower sales level will be
maintained for awhile until there is another change in rates.
There won't be much specific improvement in coming months."
 Reuter
