Despite fears the Sept. 11 terrorist attacks would further weaken the housing market, October new home sales improved 0.2% to 880,000 over September’s number of 878,000.

Bruce Smith, president of the National Association of Home Builders (NAHB) says the drastic drop in 30-year mortgage interest rates to 6.5% has been a catalyst in the improvement.

“Consumers responded to these very favorable mortgage rates, despite the overall weakness in the economy and the continued economic fallout generated by the events of Sept. 11,” Smith says.

However, Smith also warns that other factors, such as waning consumer confidence and an increasing unemployment rate, could spell a slight overall downturn in the housing market for the fourth quarter.

“We expect to see a modest housing slowdown going into the beginning of next year, but when you compare this to past economic cycles, this is quite mild,” he says.