Thursday, October 29, 2009

Surprise drop in new US home sales

WASHINGTON: Sales of new homes in the United States unexpectedly tumbled last month, their first drop in six months, underscoring the hazards to an economic recovery that businesses appeared to be banking on.

New single-family home sales fell 3.6 per cent to a 402,000-unit annual pace from a downwardly revised 417,000 units in August, the Commerce Department reported yesterday.

Analysts polled by Reuters had expected sales to rise to a 440,000-unit pace from August's previously reported 429,000.

A separate report from the Mortgage Bankers Association showed demand for mortgages has fallen in the past three weeks, as buyers move to the sidelines ahead of the Nov 30 expiration of a popular home-buyers' tax credit.

The housing data represented a road bump in a recovery that otherwise appeared to be widening.

Another report from the Commerce Department showed that new orders for long-lasting US manufactured goods rose 1 per cent last month, as business stepped up investment plans.

'One month is obviously not a trend, and I think there is plenty of evidence that things are turning around. I still believe the economy has hit bottom and is on the way up, but it will be a long, slow process,' said Mr Mark Bonhard, an investment adviser at Dawson Wealth Management in Cleveland, Ohio.

US stock indexes extended losses when the data was released.

Despite the drop in sales, the number of new homes for sale at the end of the month shrank to its smallest in 27 years, leaving the supply of homes available at 7.5 months' worth.

The median sales price rose last month to US$204,800 (S$286,000) from US$199,900.

The US$8,000 new home-buyers' tax credit, which expires on Nov 30, helped lift the housing market from its deepest downturn since the Great Depression. US lawmakers are considering extending it.

The rise in new orders for long-lasting US manufactured goods met Wall Street expectations and was the second increase in the last three months, offering some hope that the economic recovery would continue.

However, compared with a year ago, orders were down 24.1 per cent.

'In a recovering economy, you'll get three steps forward and then two steps back. That's what you're seeing here,' said Mr David Katz, chief investment officer at Matrix Asset Advisors in New York. 'This data point is positive.'

Durable goods orders are a leading indicator of manufacturing, which in turn provides a good measure of overall business health.

Source, Straits Times 29 Oct 2009

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