Despite indications earlier this year of a slight upturn in the industry, two large housing markets experienced a setback during the first quarter.

As a result, building companies are expected by analysts to show weak earnings from both their construction and mortgage businesses. Kaufman & Broad, the California giant, recently announced a 100% financing program in a bid to stimulate sales.

In Southern California, the country's largest housing market, home sales dropped 16% from the year-earlier period, according to TRW Redi Property Data, a real estate information company in Riverside, Calif.

New and existing single-family and condominium sales in South Florida dropped 12% from the year-earlier period, to 16,546.

The average rate for a 30-year fixed rate mortgage was 8.79%, compared with 7.3% in the first quarter of 1994.

In the California market, sales were down most severely in San Diego County, with a 31% decline. In Los Angeles County, housing dropped only 7% for the same time period.

The least expensive homes in the region - those under $100,000 - were little affected by the declines, however, actually creeping up slightly. Homes in the $100,000 to $175,000 bracket were also less affected, with sales slipping 15%. But California is generally a high-cost area, and all the higher categories were down 20% or more in number of homes sold.

Broward County in South Florida had a decline of 16% in home sales. Both Dade and Palm Beach counties saw a 10% drop from the level a year ago.

Inexpensive houses, meanwhile, were dominant in the area, with those costing less than $100,000 accounting for 53.6% of sales.

According to TRW, higher interest rates had more of a negative impact on the move-up market, while activity among first-time homebuyers remained stable.

In South Florida, average selling prices dropped 2.2% in the first quarter. Homes selling for less than $100,000 represented 53.6% of the housing market in the first quarter this year. Homes in that price range were 52% of the market last year.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.