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New home sales up, prices down |
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Written by admin admin
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Sales pace bucks forecast to show increase as builders cut prices in effort to cut inventories.
NEW YORK (CNNMoney.com) -- Lower prices helped give new home sales an unexpected lift in July, according to a government report Friday that was a rare ray of good news about the state of the battered housing market.
New home sales rose 2.8 percent to an annual rate of 870,000 from a revised 846,000 rate in June, the Commerce Department reported. Economists had been looking for sales to fall to a rate of about 825,000, a level that would have been a seven-year low.
But builders, worried about a big glut of unsold homes on the market, cut prices - a strategy that apparently worked. The average price of a new home sold in the period fell to $300,400, down 3.4 percent from a year ago.
While the median price edged up 0.6 percent to $239,500 from a year earlier, it's still off 8.8 percent from the record high hit just last March. The July 2007 median is also below the reading for all of 2005 and 2006.
Prices have been hurt by a large supply of homes on the market but the latest report started to show some progress whittling away at that glut. The government estimated there was a 7.5 month supply of homes in June, but that slipped to a 6-month supply in the latest reading. The average time that a completed home sat on the market edged higher in the latest report, though, to 6.1 months from 5.9 in June.
The report's price readings probably don't capture all the downward pressure on prices. In the latest survey by the National Association of Home Builders, about three-quarters of builders reported offering extras such as paying for closing costs or adding features for free to boost demand. The same survey found builders' confidence in the housing market at a 16-year low.
The downturn in new home sales and prices have hammered the earnings of the nation's largest builders.
While luxury home builder Toll Brothers managed to report a narrow profit this week that topped forecasts of a loss, it still saw earnings fall 85 percent from year-earlier levels. And the six publicly traded builders who are larger than Toll have all reported losses recently.
Lennar the nation's No. 1 builder, and No. 5 KB Home both reported a loss in the latest quarter. No. 2 home builder D.R. Horton and No. 3 Centex both reported losses far bigger than Wall Street had expected, while No. 6 Pulte Homes and has reported losses for the last two quarters and analysts project losses for at least the next year.
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