New-home sales fell less than expected in June and inventories dropped to a 31/2-year low, the government said Friday, fueling hopes that the worst of the housing slump is over. Meanwhile, durable goods orders and consumer sentiment unexpectedly rose.
June sales of newly constructed homes fell 0.6% to an annual rate of 530,000 units, the Commerce Department said. Wall Street analysts predicted a drop to 505,000. Sales skidded 33% from last year.
Inventories fell a sharp 5.3% to 426,000, the lowest since December 2004. Builders have cut new-home supply for 14 months. The time it would take to clear out supply at the current sales pace fell to 10 months, a four-month low.
"New-home sales look to be reaching a bottom," Joel Naroff, chief economist at Naroff Economic Advisors, said in a note.
The median new-home sales price rose to $230,900 from $227,700 in May, but fell 2% from last year. Other price gauges suggest much bigger declines.
Meanwhile, orders for long-lasting manufactured goods rose 0.8% in June on strong demand for defense gear, Commerce said. Economists expected a 0.3% fall.
Demand for nondefense capital goods excluding aircraft, a proxy for business spending, rose 1.4% vs. May and 4.6% vs. a year earlier.
The rise in durable goods may have been partly due to overseas demand that is expected to fade as Europe and Asia slow.
"I wouldn't extrapolate the improvement in light of the weak economic data that have started to flow in from outside the U.S.," said Keith Hembre, chief economist at First American Funds.
Still, factory activity is holding up better than in the 2001 recession.
Meanwhile, the Reuters/University of Michigan consumer sentiment index rose to 61.2 in July from June's 28-year low of 56.4. The mid-July reading was 56.6. Plunging oil futures -- and a dip in retail gasoline prices -- may have fueled a late-month morale boost.
September crude fell $2.23 to $123.26 a barrel on Friday, the lowest close in nearly two months.
Stocks rose Friday on the economic data and cheaper oil. The Nasdaq rose 1.3%, the S&P 500 0.4% and the Dow 0.2%.
Commerce revised up new-home sales for the previous three months by a total of 50,000 units.
Stronger sales and falling inventories are hopeful signs. But the housing and mortgage markets remain deeply troubled.
Existing-home sales fell 2.6% to a new low in June, the National Association of Realtors said Thursday. The supply of homes rose to 11.1 months' worth as banks unload foreclosed properties.
Foreclosure filings more than doubled vs. a year earlier to 739,714 in the second quarter, real estate data service RealtyTrac said Friday. Activity was especially high in Nevada, California, Florida, Ohio, Arizona and Michigan.
The Senate is expected on Saturday to approve a bill to rescue some 400,000 households facing foreclosure. It also provides guarantees for Fannie Mae and Freddie Mac, which have lost billions of dollars due to mortgage defaults.
Source: http://news.yahoo.com/s/ibd/20080725/bs_ibd_ibd/20080725feature;
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