New home sales rose 11% in June

Although improved from May, they're down by 21.3 percent from a year earlier. Median price fell.

By FROM NEWS SERVICES

Last update: July 27, 2009 - 8:41 PM

WASHINGTON - New home sales jumped in June, according to Commerce Department data released Monday, another sign that the housing market could be starting to stabilize even as home prices continue to stumble.

Sales rose 11 percent over the previous month to an annualized rate of 384,000. That was better than analysts were expecting, but down 21.3 percent compared with June 2008.

Builders have cut production and lowered prices to compete in a depressed market.

In another good sign, the supply of new homes for sale also fell again in June. It would take 8.8 months to sell all the homes on the market as of June, compared with 10.2 months as of May. That is the lowest sales rate since October 2007, said Win Thin, senior currency strategist for Brown Brothers Harriman, in a research note Monday.

"Overall, the housing sector is showing signs of continued improvement. Though the housing market remains weak compared to the peaks, the improved data will continue to feed into market optimism on green shoots," Thin said.

Meanwhile, the median new home price fell 11 percent to $206,200 compared with June 2008. Builders are struggling against a glut of foreclosed homes that has brought down prices across the country. Analysts have said that prices are likely to continue to fall into 2010.

New home sales rose last month at the fastest clip in more than eight years as buyers took advantage of bargain prices -- a clear sign, economists said, that the real estate market may be bouncing back.

Historically low interest rates and a federal tax credit for first-time homeowners also helped push home sales to their highest level since November, the Commerce Department reported Monday.

While home prices are still falling around the nation, sales have risen for three months in a row. Construction of new homes is at the busiest level since fall. And home resales rose in June for the third straight month.

"The worst of the housing recession," said David Resler, chief economist at Nomura Securities, "is now behind us." And as with the overall economy, the "recovery" is likely to be slow and arduous, he said.

Put in perspective, the improvement in sales is modest. The pace of sales for new homes in June was still 72 percent below the peak of four summers ago, and there is still an enormous inventory of homes lingering on the market.

New home sales for June were strongest in the Midwest, where they jumped 43 percent from May's total. Sales climbed 29 percent in the Northeast and 23 percent in the West. They declined slightly in the South.

The median sale price was $206,200, down from $234,300 a year earlier and $219,000 from May. Economists expect home prices to continue falling until the competition from low-priced foreclosures ebbs sometime next year.

The Washington Post and the Associated Press contributed to this report.