Fewer U.S. new homes than forecast were sold in August, signaling the housing market remains depressed even as mortgage rates dropped.
Purchases were unchanged at a 288,000 annual pace, matching July as the second-lowest in data going back to 1963, figures from the Commerce Department showed today in Washington. The median price fell to the lowest level in more than six years.
A jobless rate hovering around 10 percent will probably keep foreclosures elevated and dissuade some consumers from taking additional debt to buy houses. The inability of housing to rebound one year after the economic recovery began in among reasons Federal Reserve policy makers this week said they are willing to take additional steps to spur growth.
“Housing is going to languish for some time to come,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “Affordability is near record highs, but the number of people who have been pushed out of the market by poor credit, poor financial conditions or being stuck in a home they can’t sell is going to be a hit to new-home sales.”
Another Commerce Department report today showed orders for capital equipment rebounded in August, signaling business investment is holding up better than some economists projected.
Capital Goods Demand
Bookings for goods like computers and communications gear climbed 4.1 percent after a 5.3 percent decline in July that was smaller than previously estimated, figures from the Commerce Department showed today in Washington. Total orders dropped 1.3 percent, depressed by volatile demand for aircraft, and bookings excluding transportation equipment rose more than forecast.
Stocks held earlier gains spurred by the durable goods report. The Standard & Poor’s 500 Index rose 1.8 percent to 1,145 at 10:06 a.m. in New York. Treasury securities fell, sending the yield on the benchmark 10-year note up to 2.60 percent from 2.55 percent late yesterday.
Economists forecast new home sales would increase to a 295,000 annual pace, according to the median of 72 survey projections. Estimates ranged from 270,000 to 325,000. The government revised the July figure up from a prior estimate of 276,000. The record-low was reached in May at a 282,000 pace.
The median price decreased 1.2 percent from August 2009 to $204,700, the lowest since December 2003.
Purchases fell in two of four regions. An 11 percent drop in the South, the biggest region, brought sales down to a record low 148,000, and demand decreased 26 percent in the Midwest. Sales surged 54 percent in the West and climbed 17 percent in the Northeast.
The supply of homes at the current sales rate fell to 8.6 months’ worth from 8.7 months in July. There were 206,000 new houses on the market at the end of August, the fewest since August 1968.
Reports earlier this week showed the housing market is hovering at low rates. Housing starts increased to an annual rate of 598,000 and outpaced the gain in building permits, signaling construction will probably cool.
Sales of existing homes increased to a 4.13 million rate in August, the National Association of Realtors said yesterday. The pace was still the second-lowest on record going back a decade.
Home resales are tabulated when a contract is closed, while new-home sales are counted at the time an agreement is signed, making them a leading indicator of demand.
A government tax credit of up to $8,000 gave housing a temporary lift late last year and into 2010. Demand for new houses plunged in May, the month after buyers were originally required to sign deals in order to get the incentive.
After averaging 9.3 percent in 2009, joblessness this year will average 9.6 percent and 9.2 percent in 2011, according to the median forecast of economists surveyed by Bloomberg this month. The last time unemployment exceeded 9 percent for three consecutive years was from 1939 to 1941.
The lack of jobs is also one reason foreclosures are climbing as households stop making mortgage payments. Home seizures reached a record in August for the third time in five months, RealtyTrac Inc. said Sept. 16.
The Obama administration said Aug. 30 it planned to announce proposals in the next few weeks for an emergency loan program for the unemployed to avert default, and a government mortgage refinancing effort to lower monthly mortgage payments to avoid foreclosures.
The Federal Reserve kept its benchmark interest rate in the range of zero to 0.25 percent this week, where it’s been since December 2008, and said the pace of recovery and job growth have “slowed in recent months.” The central bank said it will “continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed.”
The end of the homebuyer credit, joblessness and sagging confidence prompted a decline in orders at Hovnanian Enterprises Inc., the largest homebuilder in New Jersey said on Sept 1. The company said its net orders dropped 37 percent in the quarter ended July 31 from a year earlier.
“Job creation is the key to a housing recovery, which makes it difficult to predict how improvements in the economy and housing market play out,” Chief Executive Officer Ara Hovnanian said in a statement.
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