27.10.2006 07:08 Real Estate
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New single-family home sales increased 5.3 percent to an annualized rate of 1.075 million units in September, the Commerce Department said. It was the second straight monthly gain, but the increase reflected a greater willingness by sellers to slash prices.
The department said the median price for a new home was down 9.7 percent from $240,400 a year earlier, the biggest year-on-year price drop since December 1970.
At the same time, a slight rise in orders for long-lasting manufactured goods outside the volatile transportation sector appeared to offer some backing to the inflation-wary Federal Reserve's projection of moderate economic growth.
Analysts said a drop in unsold homes on the market also offered an early sign the housing sector was stabilizing after a big slump, easing concerns it could drag the economy lower.
"It is hard to say but it looks like we are in for the soft (economic) landing," said Stephen Gallagher, chief U.S. economist at Societe Generale in New York. "It is telling me that the worst is over for housing."
Stocks rose as markets saw the data supporting the Fed's growth forecast and suggesting the central bank would likely hold benchmark interest rates steady for some time. Treasury debt security prices also rose.
The dollar hit a three-week low against the euro after the report on durable goods orders.
A report earlier this week showing sales of existing homes had fallen for the sixth month in a row had sparked fears that a rapid cooling of housing markets might substantially dent growth.
GREENSPAN: OUTLOOK 'REASONABLY GOOD'
Former Federal Reserve Chairman Alan Greenspan said on Thursday the U.S. economy was pulling away from a sharp housing-sector downturn and that the outlook for growth was "reasonably good." But, he noted in a speech delivered before the government released the home sales figures, that the sector's woes were "not over."
"Most of the negatives in housing are probably behind us," Greenspan said at a Washington conference. "The fourth quarter should be reasonably good, certainly better than the third quarter."
While the pace of new home sales picked up in September, it was still off 14.2 percent from year-ago levels -- a sign of how far the once high-flying market has fallen.
Still, the supply of homes available for sale at September's sales pace fell to 6.4 months' worth from 6.8 months in August, as the number of homes on the market fell 1.9 percent to 557,000.
"Between the starts and the aggressive pricing on sales they are clearing inventories in a very rapid fashion," said Societe Generale's Gallagher.
AIRCRAFT ORDERS SURGE
The department said orders for durable goods -- items meant to last three or more years -- leaped 7.8 percent in September, the biggest jump since June 2000, on a rush of civilian aircraft orders.
Demand for non-defense aircraft and parts rose 183.2 percent, the biggest gain since July 2002.
While the overall increase in orders was much greater than economists had expected, orders were up a smaller-than-forecast 0.1 percent when transportation orders were stripped out.
"Outside of the volatile aircraft orders, manufacturing is still subdued and that's consistent with an economy that's growing moderately," said Gary Thayer, chief economist at A.G. Edwards & Sons in St. Louis.
Offering an upbeat sign on capital spending plans, orders for non-defense capital goods excluding aircraft, a proxy for business spending, rose a larger-than-expected 1.1 percent.
A separate report from the Labor Department showed the number of workers applying for jobless benefits rose by 8,000 last week to 308,000, in line with expectations and still pointing to a relatively healthy job market.
(With additional reporting by David Lawder and Alister Bull in Washington, and Nick Olivari in New York)
