New home sales in US shoot up

New home sales in US shoot up
The Times of India, July 28, 2009, Page 21

Jack Healy

Sales of new homes in US posted their largest monthly gain in eight years in June, the government reported on Monday, a sign that the housing market is bottoming as buyers take advantage of lower prices.

The commerce department reported that new single-family home sales rose 11% in June, an increase that dwarfed economists expectations of a 3% increase. The pace of home sales rose to a seasonally adjusted rate of 384,000 a year, the highest level since November.

Despite the monthly increase, sales of new homes were still down 21% from June 2008, and the market is still swamped by a glut of forsale houses and foreclosed properties. These are still really bad numbers, an economist at IHS Global Insight, Patrick Newport, said.

The market just couldn't have dropped much further.

As sales rose, median prices of new homes continued to fall, slipping to $206,200 from $232,100 in June a year ago. The figures were the latest evidence that a three-year slump in the country's housing market was levelling off as prices fell back and some builders and buyers began to step tentatively back into the market. Earlier this month, the government reported that housing starts rose 3.6% in June from a month earlier, and a trade group reported that sales of previously owned homes also rose for another month.

“Sales are picking up a little," a senior economist at 4Cast, David Sloan, said. "Whether it's going to pick up any momentum is really the key. I think we have to be doubtful about that." On Tuesday, a closely watched measure of home prices will be released, offering some hints about whether the long plunge in housing values is abating.

Economists are expecting a 18% year-over-year decline in prices in the S&P Case-Shiller Home Price Index. Although new-home sales have risen for three months, many economists worry that rising unemployment, stagnant wages and continued tightness in lending markets will weigh down the housing market for the rest of the year.

There are still worries that the lack of employment growth and lack of wage growth is restraining consumer income, and that's going to ensure that the recovery is quite modest, Sloan said. NYT NEWS SERVICE.