US new home sales slip 0.6%

US new home sales slip 0.6%
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: April 24 2009 14:18 | Last updated: April 24 2009 16:02
http://www.ft.com/cms/s/0/77af669a-30d1-11de-bc38-00144feabdc0.html


Sales of new homes in the US dipped in March but a sharp upward revision to the February figure lifted hopes that the stricken housing market might be stabilising.

New home sales eased by 0.6 per cent in March from the prior month, trailing expectations that they would be unchanged. February sales were revised up from the original 4.7 per cent increase to show a 8.2 per cent jump. Meanwhile the median price of a new home slid from $208,700 to $201,400 last month.

Separately on Friday the commerce department said that US companies cut their durable goods purchases in March for the seventh time in eight months as the economic downturn continues to curb capital spending. However the pace of decline has been slowing and the figure was better than economists expected.

Compared with a year ago home prices remain severely depressed. Prices of new homes are off by 12.2 per cent on the year, while new home sales are down by 30.6 per cent from March of 2008.

Inventories of new homes are also falling, which economists consider a positive development that could eventually revive the market. The number of new homes for sale fell by 5.2 per cent in March to 311,000 and is now down by 33.7 per cent year-on-year.

“There is still a long way to go but a big decline in inventories would spur buyers because it would reduce the fear of further big price declines,” said Ian Sheperdson, chief US economist at High Frequency Economics.

New home sales fell the most in the Northeast last month, where they were off by 32.1 per cent. Sales were down by 7.8 per cent in the Midwest, flat in the South and rose by 15.1 per cent in the West.

The recent stabilisation in the market for new homes has boosted homebuilders’ spirits. Last week the National Association of Home Builders said that builder confidence on its sentiment index made the biggest monthly gain in five years.

The commerce department said on Friday that US durable goods orders fell by 0.8 per cent to $161.2bn in March from the month before, retreating from a revised 2.1 per cent jump the previous month. Economists predicted that orders would fall by 1.5 per cent, continuing what had been a record slump.

“After a breathtaking slump between September last year and this January, the rate of decline in US durable goods orders has clearly slowed,” said Paul Dales, chief US economist at Capital Economics. “This fits within the broader pattern that we are seeing: the severity of the recession is easing gradually, but any actual recovery is still some way off.”

Excluding volatile orders for transportation goods, new orders slid by 0.6 per cent. They were also down by 0.6 per cent after factoring out defence orders, which had fuelled February’s surge.

The closely-watched core capital goods orders figure – the clearest sign of future capital spending – rose by 1.9 per cent to $52bn.

The manufacturing sector has been suffering from weakness at home and slowing growth abroad. Over the year, orders of durable goods in March were off by 27.1 per cent.

Last week the Federal Reserve said that US industrial production fell for the fifth month running in March, dropping by 1.5 per cent on weak manufacturing output. The decline was worse than economists expected and driven by falling production of business equipment and construction supplies.

Manufacturing output has dropped 15 per cent in the past year and overall industrial output has declined by an annualised 20 per cent in the first quarter, the sharpest quarterly drop since 1975.

On Friday the commerce department said that orders for transportation equipment declined by 1.4 per cent to $37.9bn. It was the fifth decline in the last six months. Meanwhile, orders for metals fell by 3.2 per cent, car and car part orders dropped by 1.7 per cent but new orders for non-defence aircrafts and their parts rose by 4.4 per cent.

Unfilled orders for durable goods fell in March. The 1.4 per cent monthly decline was the sixth in a row, signalling that factories will continue to face constraints.

Inventories of durable goods also continue to shrink. They fell by 1.1 per cent in March and economists suggest that continued liquidation of stocks could weigh heavily on first quarter US gross domestic product.