New home sales rise by largest amount in 5 months

WASHINGTON (AP) -- Sept. 27, 2006 -- Sales of new homes posted the biggest increase in five months in August, raising hopes that the steep slide in the housing industry may be leveling off.

Sales of new single-family homes increased by 4.1 percent last month to a seasonally adjusted annual rate of 1.05 million units, the Commerce Department reported Wednesday. It was the biggest increase since an 8 percent gain in March.

The August rise followed a 7.5 percent plunge in sales in July, which had registered the third straight decline.

The gain was far better than the 3 percent decline economists had been expecting and could signal that housing is beginning to level off after a steep slide. However, the price of homes sold in August fell to $237,000, down 1.3 percent from August 2005. It was the biggest year-over-year price decline in more than three years.

From 2001 through 2005, housing enjoyed five consecutive years of record sales, propelled by the lowest mortgage rates in more than four decades.

However, this year sales have been falling as mortgage rates rose and the economy slowed. The drop in sales and construction of new homes has been so sharp that some economists have worried that it could plunge the country into a recession.

But other analysts argue that recent declines in mortgage rates should help put a floor on the housing decline.

The increase in new home sales contrasted with earlier reports showing that sales of existing homes fell in August for a fifth straight month while construction of new homes and apartments dropped by a sharp 6 percent last month.

Sales of new homes were up in every region of the country except the West, where they dropped a sharp 17.7 percent. Sales rose 21.7 percent in the Northeast, 12.2 percent in the Midwest and 11.1 percent in the South.

Rates on 30-year mortgages drop to lowest level since April

Rates on 30-year mortgages drop to lowest level since April: "WASHINGTON -- Sept. 15, 2006 -- Rates on 30-year mortgages fell for the seventh time in the past eight weeks, dropping to the lowest level since early April.

Mortgage giant Freddie Mac said Thursday that 30-year, fixed-rate mortgages dipped to 6.43 percent this week, down from 6.47 percent last week.

Rates on 30-year mortgages had hit a four-year high of 6.80 percent on July 20 before beginning the sustained slide.

Investors have become more convinced in recent weeks that a drop in oil prices will keep inflation under control and allow the Federal Reserve to keep interest rates steady."