Home Sales Weather Snowstorms Poorly

WASHINGTON — Brutal winter weather contributed to a sharp drop in home sales last month, though sales of existing homes still set a record for the year, a real estate agents group said Monday.

The National Assn. of Realtors said sales of existing homes fell 3.5% in December to a seasonally adjusted annual rate of 3.87 million, from a revised rate of 4.01 million in November. The December total was lower than the rate of 4 million forecast by Wall Street economists.

For all of 1996, sales rose 7.5% to a record 4.09 million, beating the previous record of 3.99 million homes sold in 1978.

The group said snowstorms in the West caused much of December’s decline. Sales also fell in the Midwest and South. Sales in the Northeast improved.

According to a separate report released Monday, the nation’s industrial output grew a little more slowly than previously thought for the last 20 years, and inflation pressures were slightly more muted.

The conclusion came from revised figures the Federal Reserve Board issued on production by the nation’s mines, factories and utilities over the last two decades, part of an overhaul of the method to be used to calculate output.

December’s industrial output increase was revised down to 0.7% from a previously reported 0.8% gain. December’s capacity use rate was revised to 83.5% from 83.8%.

For all of 1996, industrial output rose 2.7% instead of 3.2% as previously reported, the Fed said.

The revised figures also suggest slightly more breathing room on inflation, because they show industries were not running quite as close to their limits as previously thought.

On the issue of home sales, industry executives and analysts said December’s drop was weather-related and that the results were still respectable after a strong November.

“I think we will probably need another month of activity to see how big the weather factor was,” said economist John Bailey at Donaldson, Lufkin & Jenrette.

The group’s chief economist, John Tuccillo, said the jump in home sales last year reflected improved consumer sentiment that is likely to continue in 1997, though demand would probably slacken.

“The psychological-driven demand has been pretty much used up so that it is not going to be there during 1997 to bolster the housing market,” he told reporters.

Despite the expected drop this year, the overall market should remain strong by historical standards, he added.

Last month’s sales rate was equal to the pace in December 1995, just before sales accelerated in early 1996 and remained strong despite a slight rise in mortgage rates for much of the year.

Last month, sales fell 7.7% in the West, 4.1% in the South and 3.8% in the Midwest. Sales in the Northeast rose 5.1%.

Previously, the Realtors group reported November sales at an annual rate of 4.04 million but revised that to 4.01 million.

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Existing-Home Sales

Seasonally adjusted annual rate, in millions of units:

December: 3.87

Source: National Assn. of Realtors