WASHINGTON: Sales of newly built US single-family homes rose to their highest level in nearly a year last month, according to government data released yesterday that indicated the housing market was gradually recovering from a three-year slump.
New home sales have risen for five straight months. The Commerce Department said sales rose 0.7 per cent to 429,000, the highest since September last year, from a downwardly revised 426,000 in July.
However, the increase was below market expectations for a 440,000- unit rate. July's sales pace was previously reported at 433,000 units.
The median price of a new house fell 9.5 per cent from the previous month, the biggest decrease since records began in 1963.
The worst housing slump since the Great Depression may be drawing to a close as first-time buyers rush to take advantage of tax credits before a November deadline. Federal Reserve policymakers this week pledged to keep borrowing costs low to sustain the recovery past the time when the government stimulus measures wane.
'The free-fall in housing has ended, but the market will not roar back,' Mr Ryan Sweet, a senior economist at Moody's Economy.com in West Chester, Pennsylvania, said before the report. 'Although new home sales are rising, they remain at extremely depressed levels.'
Orders for goods meant to last several years dropped 2.4 per cent last month, the worst performance since January, the Commerce Department also reported yesterday. Restrained consumer spending and near-record excess capacity mean companies will probably not boost investment in new plants or equipment in coming months.
'The recession in business investment isn't over yet,' Mr Paul Ashworth, a senior US economist at Capital Economics in Toronto, said in a note to clients.
The report is 'a wake-up call for anyone expecting a smooth transition to a strong economic recovery.'
The median price of a new home decreased to US$195,200 (S$276,000), the lowest level since October 2003 and down 12 per cent from August last year, yesterday's report showed.
Sales of new homes were 3.4 per cent lower than a year earlier.
Last month's surprising fall in orders for goods expected to last at least three years was due mainly to a drop in demand for commercial aircraft. The worst reading since January for durable goods is evidence that any recovery in manufacturing will be slow and gradual.
Economists were disappointed with the report but most said it reflected the uneven nature of the economy as it transitions out of the worst recession since the 1930s.
The results are consistent with 'the early stages of a business cycle recovery, and thus do not contradict perceptions that this is where the economy is now', Mr Pierre Ellis, an economist at Decision Economics, wrote in a note to clients.
Orders for durable goods had increased by a revised 4.8 per cent in July.
Wall Street economists expected a 0.5 per cent increase last month, according to a survey by Thomson Reuters. Compared with the same period last year, new orders were down 24.9 per cent.
Meanwhile, a survey released yesterday showed US consumer sentiment rose late this month to the highest since January last year, as expectations of an economic rebound continued to grow.
The Reuters/University of Michigan Surveys of Consumers said its final index of sentiment for this month rose to 73.5 from 65.7 last month. This was above economists' median expectation for a reading of 70.3, according to a Reuters poll.
BLOOMBERG, ASSOCIATED PRESS, REUTERS
Source: Straits Times, 26 Sep 2009