Unexpected rise in sales of new homes in US

Stephen Foley
Tuesday 28 October 2008 01:00

Sales of newly built homes in the US increased last month, an unexpected bright spot for investors searching for a bottom to the troubled housing market. In September, the number of purchases was running at an annualised rate of 464,000 – up 12,000 from the previous month and better than the 450,000 expected by Wall Street analysts.

Demand for new homes had been languishing at 17-year lows because of a mortgage famine and fears that prices still had further to fall. The number of purchases in September was still a third below last year's level. But buyers are increasingly tempted by bargains on offer. Builders have dropped their prices by an average 9.1 per cent, to a four-year low, according to the Commerce Department data.

September's increase in sales was strongest in the western US, where the boom had been strongest, the glut of new homes had been largest and the subsequent housing recession had been deepest. Economists, though, say the latest figures do not yet factor in the deterioration in consumer sentiment that occurred after Lehman Brothers went bankrupt in the middle of last month, the banking system plunged into crisis, and mortgage rates crept up once again.

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