Sales of new homes in US jump 0.2pc to 6-year high

PUBLISHED : Wednesday, 29 October, 2014, 5:28am
UPDATED : Wednesday, 29 October, 2014, 5:28am

Sales of new single-family homes climbed to a six-year high in the United States last month, but a sharp downward revision to August's sales pace indicated the housing recovery remains tentative.

The Department of Commerce said sales rose 0.2 per cent to a seasonally adjusted annual rate of 467,000 units, the highest reading since July 2008.

August's sales were revised to 466,000 units from 504,000.

Economists had forecast new home sales of 470,000 units for last month.

"We expect the housing market recovery to remain relatively gradual over the coming months," said Gennadiy Goldberg, an economist at TD Securities.

New home sales, which account for about 8 per cent of the housing market, tend to be volatile month to month and large revisions are not unusual.

Compared with September last year, sales were up 17 per cent.

Housing is slowly regaining its footing after activity stalled in the second half of last year as mortgage rates soared. With the 30-year fixed mortgage rate falling last week to its lowest level since June last year, sales could pick up.

Mortgage rates have declined in tandem with a sharp fall in treasury debt yields as slowing global growth and a sharp sell-off in international stock markets prompted traders to push back expectations for an interest rate increase by the Federal Reserve.

Slow wage growth, however, remains a constraint for an acceleration in home sales. Data showed sales of second-hand homes touched a one-year high last month.

New home sales fell 8.9 per cent in the west, handing back some of August's 28.1 per cent surge. In the populous south, sales rose 2 per cent, while they increased 12.3 per cent in the midwest. Sales were flat in the northeast.

With sales rising modestly, the stock of new houses available on the market climbed 1.5 per cent to the highest level since July 2010.

Builders have been ramping up construction and the improvement in inventory should provide buyers with more choices and temper house price increases.

At last month's sales pace, it would take 5.3 months to clear the supply of houses on the market, unchanged from August.

Six months' supply is normally considered a healthy balance between supply and demand.

The median new home price fell 4 per cent to US$259,000 from a year ago.