Well, nimrod, I finally made the effort to look up the meanings. Here's what I gathered:
Sarah's about Stevie's aborted baby. The dad was Don Henley. Also, Stevie had a friend named Sarah, so it could have been about her, too. (I almost cried when I read about the aborted baby.)
New Kid in Town may have been about Bruce Springstein who came along around that time. Henley said something about the new kid in town being a new star who might displace you from your place in the charts or the fans' hearts.