(WASHINGTON) Sales of new US single-family homes rebounded strongly in June from the prior month's record low, driving the number of houses on the market to its lowest level in nearly 42 years.
The Commerce Department said yesterday sales jumped 23.6 per cent to a 330,000 unit annual rate from a downwardly revised 267,000 units in May. The sales pace last month was still the second lowest since records started in 1963. The percentage increase was the largest increase since May 1980, and partially unwound the prior month's historic 36.7 per cent decline.
Analysts polled by Reuters had forecast new home sales rising to a 320,000 unit pace last month from May's previously reported 300,000 units.
'Right now we're running about 60 per cent below the average annualised rate for the last decade, so there's a lot of potential out there for improvement,' said Michael O'Rourke, chief market strategist at BTIG LLC in New York. 'It seems like sales are bottoming, so its just a matter of that foreclosure inventory clearing up. After that, then we can start seeing some upside. I expect that to happen later this year, maybe next year.'
US government debt prices dipped on the home sales data, while US stocks added to gains. The US dollar pared losses against the yen.
Recent data have suggested the economy's recovery from its longest and deepest recession since the 1930s moderated somewhat in the second quarter. Economists expect weak housing activity to act as a drag on growth for much of the year.
The government is expected to report on Friday that GDP growth slowed to a 2.5 per cent annual rate in the April-June period from a 2.7 per cent pace in the first three months of the year.
The Commerce report suggested the housing market may be close to working through the distortions following the end of a popular home-buyer tax credit in April, an incentive that brought forward sales. Data last week showed home construction fell to an eight-month low in June, while sales of existing home sales were the lowest in three months.
Analysts, however, believe a drop in home building is unlikely to ignite a new recession since housing is a much smaller share of the economy now than it was at the top of the housing boom. The impact of a 10 per cent drop in home construction has about one-third the impact now as it did in 2006, according to economists at Bank of America-Merrill Lynch. -- Reuters
Source: Business Times, 27 Jul 2010