June's 11% gain points to housing slump stabilising
(WASHINGTON) Purchases of new homes in the US climbed 11 per cent last month, the biggest gain in eight years, underscoring evidence that the deepest housing slump since the Great Depression is starting to stabilise.
Sales increased to a 384,000 annual pace, higher than any forecast of economists surveyed by Bloomberg News and the most since November, figures from the Commerce Department showed yesterday in Washington. The number of houses on the market dropped to the lowest level in more than a decade.
Falling prices and a drop in mortgage rates have started to lure buyers even as the unemployment rate rises. Economists estimate that the worst US recession in five decades is on the verge of ending as downturns in housing and manufacturing ease.
'We are making some progress in absorbing this huge inventory overhang' and that 'is a fundamental step we need to take to begin to see home prices improve', said Robert Dye, a senior economist at PNC Financial Services Group in Pittsburgh. At the same time, rising joblessness means 'a rebound will be modest at best', he added.
Economists forecast that new home sales would rise to 352,000, according to the median of 62 projections in a Bloomberg News survey. Estimates ranged from 335,000 to 377,000. Commerce revised May's reading up to a 346,000 rate from a previously reported 342,000.
'The data will reinforce the developing thinking that the housing market has bottomed and that the economy has stabilised and will grow in the third quarter,' said Jim Awad, managing director at Zephyr Management in New York.
The median price of a new home decreased 12 per cent to US$206,200 from US$234,300 in June last year. Last month's value compares with US$219,000 in May.
Sales of new homes were down 21 per cent from June last year. They reached a record-low 329,000 in January, down 76 per cent from the July 2005 peak.
The jump in sales last month was led by a 43 per cent surge in the Midwest. Purchases increased 29 per cent in the North-east and 23 per cent in the West. They dropped 5.3 per cent in the South, to the lowest level since January 1991.
Builders had 281,000 houses on the market last month, down 4.1 per cent from May and the fewest since February 1998. The number of unsold properites fell a record 36 per cent from June last year. It would take 8.8 months to sell all homes at the current sales pace, the lowest level since October 2007.
Other reports underscore the stabilisation in housing. The Wells Fargo/National Association of Homebuilders sentiment index has risen in five of the past six months, and existing home sales have increased for three months in a row. -- Bloomberg, Reuters
Source: Business Times, 28 July 2009