US new home sales slip in June, but beat forecasts

by Veronica Smith

WASHINGTON (AFP) - New US home sales ticked down in June, government data showed Friday, but the better-than-expected figures sparked a glint of hope that the worst housing slump in decades may be scraping bottom.

The Commerce Department said new home sales slipped 0.6 percent to a seasonally adjusted rate of 530,000 units in June.

Though that marked a 33.2 percent decline from June 2007, the monthly pace topped analysts' consensus forecast of 505,000 units.

Analysts said the report indicates the market may be working toward a recovery more than two years after the collapse of a boom fueled by loose credit and speculation.

Falling house prices and tight credit have brought the world's largest economy to a crawl, driving up unemployment and shaking confidence.

"New home sales look to be reaching a bottom and that is good news for everyone," said Joel Naroff at Naroff Economic Advisors.

Sales of new houses and apartments in June were at their lowest level since March, but the 0.6 percent decline reflected a sharp upward revision in the May figure, to 533,000 units from 512,000 units.

The median price of a new home fell 2.0 percent in June from a year ago to 230,900 dollars, but was up 1.4 percent from May, the Commerce Department said.

The number of new homes for sale dropped 5.3 percent to 426,000 units, a 10-month supply at the June sales pace. In May, inventory stood at a 10.4-month rate.

"We are starting to see some positive signals that sales, although moving lower, are converging to a market bottom. Drastic reductions in builder supply are starting to have a meaningful impact on inventory levels," said Brian Bethune, an economist at Global Insight.

Naroff said: "While there are still way too many homes for sale and it is taking too long -- over eight months -- to sell a house, the declining inventory will allow the adjustment in the market to continue."

By region, the South was the hardest hit in June, as sales tumbled 2.0 percent to their lowest level since May 1995. Sales in the West fell 0.9 percent to their slowest pace since September 1982.

The Northeast saw the strongest surge, up 5.3 percent, while in the Midwest sales climbed 2.5 percent.

The much larger existing home sales market fared worse in June. The National Association of Realtors said Thursday that existing home sales fell 2.6 percent last month from May to a pace 15.5 percent lower than a year ago.

In another sign of trouble, research group RealtyTrac reported Friday that foreclosures leapt nearly 14 percent in the second quarter from the previous quarter and were 121 percent higher than a year ago.

On Wednesday, President George W. Bush dropped his threat to veto a broad housing rescue bill that offers aid to homeowners facing foreclosure and support to ailing mortgage-finance giants Fannie Mae and Freddie Mac, the government-sponsored and shareholder-owned companies that underpin half the US housing market.

The bill was overwhelmingly approved hours later by the House of Representatives; the Senate is expected to pass it.

"The expected speedy passage of the housing bill will provide some support for the market, but we do not expect this support to kick in for perhaps six to eight weeks," Global Insight's Bethune said.

"In the meantime, the situation in the housing and mortgage markets remains extremely fragile."