Washington, DC, Oct. 26—Sales of new homes fell in September to their lowest level in a year as rising layoffs and new uncertainties raised by the terror attacks made Americans shy away from making big ticket purchases. According to the Commerce Department, new home sales declined by 1.4% to a seasonally adjusted annual rate of 864,000, lowest level since August 2000 when a rate of 839,000 homes were sold.

Last month's drop comes on top of a 2.9% decline in new home sales in August, according to revised figures. The government had previously reported that sales rose 0.6%.

The housing market has been a source of strength in the stagnant economy. Fallout from the September 11 terrorists attacks on the World Trade Center and Pentagon has taken a bite out of sales and is expected to dampen demand in the coming months, economists and builders say.

Economists say damage to the housing market could be worse, but low mortgage rates are providing a cushion. The average interest on a 30 year fixed rate mortgage in September was 6.82%, down from 6.95% in August. In September 2000, the rate stood at 7.91%.

By region, sales in the Northeast took the biggest hit in September, plunging by 26.6% to a rate of 47,000, the lowest level since January 1996 when sales also were at that level. In the West, sales declined by 8.2% to a rate of 224,000 and in the South they fell by 1.4% to a rate of 416,000. But in the Midwest, sales jumped by 21.2% to a rate of 177,000.

The drop in sales pulled home prices down in September. The median sales price was $162,400, a 5.1% decline from the month before.

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