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| June sales of US new homes more than forecast |
| Bloomberg / Washington Jul 27, 2010, 01:04 IST |
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Sales of US new homes rose in June more than forecast following an unprecedented collapse the prior month, a signal the worst of the slump triggered by the end of a government tax credit is over.
Purchases increased 24 per cent from May to an annual pace of 330,000, figures from the Commerce Department showed today in Washington. The rate was the second-lowest in data going back to 1963 after May’s downwardly revised 267,000 pace.
The lowest mortgage rates on record may help underpin demand, stabilising the industry that triggered the worst recession since the 1930s. Even so, increasing foreclosures are swelling the number of unsold existing homes, putting pressure on prices and keeping buyers on the sidelines as unemployment hovers near 10 per cent and the economy cools.
Sales are “bouncing along the bottom,” said Eric Green, chief market economist at TD Securities Inc in New York, who forecast an increase to 335,000. “The future is going to be dependent on job growth. There’s no demand because confidence is weak and employment is weak.”
Stocks extended prior gains following the report. The Standard & Poor’s 500 Index rose 0.7 per cent to 1,110.16 at 10:17 am in New York. The S&P Supercomposite Homebuilder Index climbed 3.1 per cent.
Economists forecast sales would rise 3.3 per cent to an annual pace of 310,000, according to the median of 73 projections in a Bloomberg News survey. Estimates ranged from 260,000 to 360,000.
The government had initially estimated May sales at a 300,000 rate and revised down figures for every month since March. The 37 per cent plunge in May was the biggest on record.
The median price decreased 0.6 per cent from June 2009 to $213,400.
Purchases increased in three of four regions, led by a 46 per cent jump in the Northeast and a 33 per cent surge in the South, the largest area. Demand dropped 6.6 per cent in the West to a record low 57,000 pace.
The supply of homes at the current sales rate fell to 7.6 months’ worth from 9.6 months in May. There were 210,000 new houses on the market at the end of June, the fewest since 1968.
To become eligible for a federal incentive worth up to $8,000, buyers had to sign contracts by April 30 and close deals by the end of last month. The surge in demand prior to the April deadline prompted the government this month to extend the closing deadline until September 30 to ensure buyers had enough time to complete transactions.
Purchases of previously-owned homes, which are tabulated when a contract closes, fell a less-than-forecast 5.1 per cent in June, sustained by a backlog of deals waiting to settle, figures from the National Association of Realtors showed last week.
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