US new home sales head south in Sept

08:34, October 30, 2009      

Email | Print | Subscribe | Comments | Forum 

Sales of new US homes unexpectedly tumbled in September, their first drop in six months, underscoring the hazards to an economic recovery even as businesses appeared to be stepping up investment.

New single-family home sales fell 3.6 percent to a 402,000 unit annual pace from a downwardly revised 417,000 units in August, the Commerce Department said. Analysts polled by Reuters had expected sales to rise to a 440,000 unit pace.

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

"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 Mark Bonhard, an investment advisor at Dawson Wealth Management in Cleveland, Ohio.

The housing data represented a road bump in a recovery that otherwise appears to be widening. Another Commerce Department report showed that new orders for long-lasting US manufactured goods rose 1 percent in September as businesses stepped-up investment plans.

US stock indexes extended losses on the housing data, while prices for government debt added to gains and the US dollar rose against the euro. At midday, the Standard & Poor's 500 index was down more than 1 percent, on track for a fourth straight daily loss on worries about the outlook.

At a meeting next week, Federal Reserve officials will sift through the data to try to determine when they should begin to withdraw their extraordinary support for the economy. With some lingering concern over the outlook, officials look set to take a go-slow approach.

Despite the drop in home sales, the number of new homes for sale at the end of the month hit the lowest level in 27 years. At September's sales pace that left the supply of homes available at 7.5 months' worth, the same as in August. The median sales price rose to $204,800 from $199,900.

The data came as a disappointment after a report last week showed sales of previously owned homes jumped to a two-year high, spurred by the $8,000 tax credit for new buyers.

Analysts said the scheduled expiration of the tax credit is now dampening activity as eligible borrowers would not be able to close their loans by then.

Durable goods orders up

The data on durable goods orders, however, provided an economic bright spot.

The rise, which matched Wall Street's expectations, was the second increase in the last three months, showing demand for these big-ticket items meant to last three years or more was picking up.

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

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

The report showed orders for non-defense capital goods excluding aircraft, a closely watched proxy for investment spending, rose a solid 2 percent in September, suggesting businesses were growing increasingly confident the economy's recovery would be sustained.

Still, overall durable goods orders were down 24.1 percent from their year-ago level.

Source:China Daily
  • Do you have something to say?
Special Coverage
  • 60th anniversary of founding of PRC
Major headlines
Editor's Pick
Most Popular
Hot Forum Dicussion