August 25, 2007	Saturday	Sha’aban 11, 1428

WASHINGTON, Aug 24: Sales of new US homes rose an unexpected 2.8 per cent in July from the prior month, the Commerce Department said on Friday, in a positive surprise for the battered housing sector.

Economists said the figure may represent a statistical quirk but the survey and a separate report on manufacturing suggested some resilience in the world’s biggest economy, at least before the onset of the credit crunch in August.

The report showed an annualised sales pace of 870,000 properties, well above Wall Street estimates for a decline to a pace of 825,000. Still, the figure was down 10.2 per cent from the sales rate of a year ago.

The report also revised up the estimate for June sales to 846,000 annualised from 834,000.

It also showed the median new home sales price increased to 239,000 in July from 230,600 a month earlier. New home inventories declined 2.6 percent to a 7.5-month supply.

The report was a positive surprise for a sector that has been bruised over the past year and has begun to roil global financial markets with the prospect of growing defaults.

Nonetheless, the report covered the period before the credit troubles in response to worries about rising failures of subprime mortgages.

The July increase came from sales in the western US, which rose 22.4 per cent, offsetting a 24.3 per cent decline in the Northeast. Other regions were generally flat.

The report came amid a positive surprise showing orders for durable manufactured goods in the US jumped 5.9 per cent in May, helped by aircraft orders, but also with significant increases in demand for autos, communications equipment, machinery, metals and military equipment.

The rise in home sales could reflect builders clearing out inventories of unsold homes. Many economists say the slump in the sector is not yet over and that construction and resale activity may suffer from the credit squeeze.

The report is “good news for the markets but new home sales remained at a very low level, consistent with our forecast of a depressed residential investment in the quarters ahead,” said Nathalie Dezeure at Ixis Corporate & Investment Bank.

Brian Bethune, economist at the research firm Global Insight, said the July increase appears to be a statistical aberration amid a downward trend in recent months.

“Given the high rate of sales cancellations that home builders have experienced in recent months, it is difficult to get a line of sight to the net sales rates,” Bethune said.

“Sales in August will face significant headwinds from further tightening in credit conditions, reduced availability of mortgage credit as many lenders shuttered their doors, and upward pressure on mortgage rates... The housing market remains on a downward trend and is expected to be a drag on economic growth through 2008.”—AFP