NEW HOUSE sales in the US jumped by 11 per cent in June, providing some of the strongest evidence yet that the market has bottomed out after being savaged for three years.
There are increasing signs that the combined impact of falling prices and low mortgage rates, along with aggressive government incentives, is driving people back to the market and stirring sales.
The monthly rise was the sharpest in nearly nine years, far exceeding economists’ expectations, and followed a revised increase of 3 per cent in the previous month. House sales rose to an adjusted annual rate of 384,000, the US department of commerce said.
“[This is] more evidence that a bottom is forming in the housing market, with new home sales confirming the signal provided by other housing data,” said Alan Ruskin, a strategist at RBS Greenwich Capital.
Last week saw a rise in existing home sales and prices, while housing starts jumped by 3.6 per cent in June and housebuilder sentiment hit a 10-month high in July.
Economists at Goldman Sachs said: “At long last, the downturn in the US residential real-estate market may be drawing to a close.”
Renewed interest in the US housing market follows months of pain, as rising unemployment has fuelled soaring rates of foreclosure and put severe pressure on prices. Economists have blamed this “negative feedback loop” for dragging the US economy into the worst recession of the past 50 years.
The median price of a new house slipped in June to $206,200 (€145,000) and is down by 12 per cent year on year.
New houses have been competing with depressed prices for existing homes and foreclosed properties but low construction costs are adding to the appeal of new residential property.
Sales jumped sharply in the midwest, the northeast and the west but slumped in the south.
Greater demand is also chipping away at the housing glut. Last month the supply of new homes fell by 4.1 per cent to 281,000. That was the lowest level since 1999 and represented an 8.8-months supply of new homes, down from 10.2 in May.
In spite of the recent signs of life, some analysts remain wary about the housing recovery. Michelle Meyer at Barclays Capital argues that foreclosures as a share of total housing inventory will not peak until the second half of next year and that prices of homes across the US will drop by 40 per cent from “peak to trough” before the market turns.
New home sales offer a clearer indication of housing demand because pricing is less flexible and foreclosures are not a direct factor.
Rising unemployment continues to make more Americans late on their mortgage payments, a sign that the rate of US personal bankruptcies will keep going up, according to monthly data from the Equifax credit bureau.
Among US homeowners with mortgages, 7.23 per cent were at least 30 days late on payments in June, up from about 4.5 per cent a year earlier and 7.01 per cent in May. – (Copyright The Financial Times Limited 2009)
