WASHINGTON — Sales of new homes rose 2.7% in August, the government reported Wednesday, as Americans decided to buy new homes before mortgage rates went higher.
The Commerce Department said new homes were sold at a seasonally adjusted annual rate of 688,000 units in August following a revised July increase of 4%. The July advance had originally been reported as a much smaller 0.5%.
Analysts said the big upward revision to July sales and the August increase presented a picture of a housing market at the end of the summer sales season that was stronger than originally believed.
They said buyers apparently decided to take advantage of relatively stable mortgage rates during the summer after a sharp run-up in rates in April and May.
But economists warned that sales were likely to fall sharply in coming months because of a second big jump in mortgage rates in September.
"I think this is a last gasp for the housing market. These numbers are likely to be the last good numbers for quite some time," said Martin Regalia, chief economist of the National Council of Savings Institutions.
Mortgage rates last week climbed to 11.02% for fixed-rate loans, the highest level since December, 1985, and up almost two percentage points from their low this year of 9.07% in late March, according to a weekly survey by the Federal Home Loan Mortgage Corp.
Richard Peach, an economist with the Mortgage Bankers Assn., predicted that mortgage rates will head higher still, climbing above 12% by mid-1988.
The rise in mortgage rates has been blamed in large part on investor fears about higher inflation, spurred in part by the weakness of the value of the dollar. A falling dollar makes prices of imported goods rise.
Michael Carliner, economist for the National Assn. of Home Builders, said he was predicting that new home sales would fall by as much as 13% to around 650,000 units this year, down from 750,000 new homes sold in 1986, with the weakness coming from rising interest rates.
For the first eight months of the year, actual sales were 9.1% below the same period in 1986.
The increase in single-family home sales in August was accompanied by a rise in home prices. The median price of a new home jumped 3.3% to $106,900. The median, or mid-point, price had been $91,500 a year ago.
The average price of a new home rose as well, climbing 1.2% to $131,900.
The increase in sales included a rebound in the South, where new homes were sold at an annual rate of 266,000 units, 4.3% higher than the July sales pace but still 8.9% below sales activity of a year ago. The South has been hurt by a slump in energy states such as Texas and Louisiana.
Sales were up 8.5% in the West to an annual rate of 217,000 units, a giant 41% higher than the sales pace a year ago.
Sales were down 6.3% in the Midwest to an annual rate of 90,000 units, but this was still 26.8% higher than a year ago. Sales in the Northeast were down 3.4% in August but were 8.4% ahead of a year ago.