Home Sales Offer Encouraging Signs

By Jeff Bater
From The Wall Street Journal Online



New-home sales defied expectations and stopped sliding during July, making a modest increase that gave the beleaguered housing market a little good news.

Meanwhile, demand surged for expensive goods during July in a broad-based increase that topped expectations by a wide margin and included a strong climb in a key barometer of capital spending by businesses.

Sales of single-family homes increased by 2.8% last month to a seasonally adjusted annual rate of 870,000, the Commerce Department said Friday. June new-home sales fell 4% to an annual rate to 846,000; originally, the government said June sales dropped by 6.6% to 834,000.

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The median estimate of 23 economists surveyed by Dow Jones Newswires was a 1.4% decline in July sales to an 822,000 annual rate.

Year over year, new-home sales were 10.2% lower than the level in July 2006.

The sickly housing sector has pulled down U.S. economic growth for six straight quarters. Groundbreakings by home builders in July fell to the lowest level in 10 years. Analysts expect the slump to continue. Lenders are tightening standards for borrowers, which sent up mortgage rates during the summer. Inventories of homes are running high.

Friday's data showed the ratio of new houses for sale to houses sold slipped during July, falling to 7.5 from 7.7 in June. There were an estimated 533,000 homes for sale at the end of July, down from June's 538,000. The median price of a new home increased by 0.6% to $239,500 in July from $238,100 in July 2006. The average price decreased by 3.4% to $300,800 from $311,300 a year earlier. In June this year, the median price was $230,600 and the average was $304,900.

Regionally last month, new-home sales increased 22.4% in the West and 0.6% in the South. Demand plunged 24.3% in the Northeast and dropped 0.9% in the Midwest. An estimated 74,000 homes were actually sold in July, down from 77,000 in June, based on figures not seasonally adjusted.