New US home sales surge in June - Housing market shows signs of bottoming

New US home sales surge in June - Housing market shows signs of bottoming
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: July 27 2009 15:57 | Last updated: July 27 2009 19:24
http://www.ft.com/cms/s/0/50214392-7abd-11de-8c34-00144feabdc0.html


New house sales in the US jumped by 11 per cent in June, providing some of the strongest evidence yet that the market has bottomed out after being savaged for three years.

There are increasing signs that the combined impact of falling prices and low mortgage rates, along with aggressive government incentives, is driving people back to the market and stirring sales.

The monthly rise was the sharpest in nearly nine years, far exceeding economists’ expectations, and followed a revised increase of 2.4 per cent in the previous month. House sales rose to an adjusted annual rate of 384,000, the department of commerce said.

“[This is] more evidence that a bottom is forming in the housing market, with new home sales confirming the signal provided by other housing data,” said Alan Ruskin, a strategist at RBS Greenwich Capital.

Last week saw a rise in existing home sales and prices, while housing starts jumped by 3.6 per cent in June and housebuilder sentiment hit a 10-month high in July.

Economists at Goldman Sachs said: “At long last, the downturn in the US residential real estate market may be drawing to a close.”

Renewed interest in the US housing market follows months of pain, as rising unemployment has fuelled soaring rates of foreclosure and put severe pressure on prices. Economists have blamed this “negative feedback loop” for dragging the US economy into the worst recession of the past 50 years.

The median price of a new house slipped in June to $206,200 (€145,000, £125,000) and is down by12 per cent year-on-year. New houses have been competing with depressed prices for existing homes and foreclosed properties but low construction costs are adding to the appeal of new residential property.

Sales jumped sharply in the Midwest, the north-east and the west but slumped in the south.

Greater demand is also chipping away at the housing glut. Last month the supply of new homes fell by 4.1 per cent to 281,000. That was the lowest level since 1998 and represented an 8.8 months supply of new homes, down from 10.2 in May.

In spite of the recent signs of life, some analysts remain wary about the housing recovery. Michelle Meyer at Barclays Capital argues that foreclosures as a share of total housing inventory will not peak until the second half of next year and that prices of homes across the US will drop by 40 per cent from “peak to trough” before the market turns.

New home sales offer a clearer indication of housing demand because pricing is less flexible and foreclosures are not a direct factor.


US home prices rise in May - First monthly increase in three years
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: July 28 2009 15:21 | Last updated: July 28 2009 15:21
http://www.ft.com/cms/s/0/4550a872-7b80-11de-9772-00144feabdc0.html


US house prices showed their first monthly gain in three years in May offering another sign that the stricken residential real estate market is stabilising.

Home prices unexpectedly climbed by 0.5 per cent from April to May, but were off by 17.1 per cent year-on-year, according to the closely watched Case-Shiller index, released on Tuesday. The monthly rise was the first since prices peaked in July 2006, while the annual drop marked the fourth straight month that the rate of decline slowed after 16 consecutive months of record falls.

“To put it in perspective, these are the first time we have seen broad increases in home prices in 34 months,” said David Blitzer, chairman of the index committee at Standard and Poor’s, which publishes the Case-Shiller results. “This could be an indication that home price declines are finally stabilizing”.

In May, 13 of the 20 metropolitan areas tracked showed monthly increases in home prices. The cities with the biggest monthly gains included Cleveland, San Francisco, Dallas and Chicago. Prices continued to drop in Las Vegas, Phoenix, Miami and Seattle.

“Activity is now recovering, and with inventory falling, prices are dropping much less quickly and could even rise a bit over the next few months,” said Ian Sheperdson, chief US economist at High Frequency Economics.

Mr Blitzer noted that the annual decline remained steep and that home prices likely have a “way to go” before seeing sustained appreciation.

Since peaking in 2006, home prices have fallen by 32 per cent. Joshua Shapiro, chief US economist at MFR argues that they will keep falling because of the enormous levels of price inflation leading up to the collapse. During the seven years prior to peaking, prices soared by 155 per cent.

Tuesday’s results add to mounting evidence that the US housing market could be bottoming out. On Monday the commerce department said that new US house sales in the US jumped by 11 per cent in June, the sharpest monthly rise in nearly nine years.

Last week saw a rise in existing home sales and prices, while housing starts jumped by 3.6 per cent in June and housebuilder sentiment hit a 10-month high in July.

Meanwhile, the Conference Board’s index of consumer confidence fell from 49.3 in June to 46.6 in July. Lynne Franco, director of the index, said that US consumers remain deeply concerned about labour market conditions and are worried about stagnant or dwindling incomes.