New-Home Sales Jumped 5.3%
Last Month as Prices Plunged
By JEFF BATER and BENTON IVES-HALPERIN
October 26, 2006
WASHINGTON -- The median price of a new home plunged in September from a year earlier by the largest amount in more than 35 years. But in a sign that the housing market could be nearing bottom, the pace of sales rebounded for a second month.
Orders for durable goods, such as cars and computers, surged 7.8% in September over the previous month, the largest gain since June 2000. Virtually all the strength came from a giant increase in commercial aircraft orders; outside of transportation, orders inched up 0.1%.
Thursday's data suggested that the economy is still growing, albeit at a moderate pace. That is the scenario sought by the U.S. Federal Reserve, which on Wednesday decided to hold short-term interest rates steady for a third straight month.
"Looking forward, there has been a significant improvement in the overall investment climate in the past month and a half -- inflation uncertainty has declined, long-term interest rates have moved down and the Fed has kept interest rates on an even keel," Brian Bethune, an economist at Global Insight, wrote in a research note.
Indeed, the Commerce Department's measures of shipments and orders of "core" capital goods, or those excluding aircraft and defense, suggest business investment is picking up and that the economy may regain some momentum in the fourth quarter after a tepid third quarter.
Shipments of core capital goods plunged 2.1% in September and increased at a slower annualized rate in the third quarter than they did in the second. But orders jumped 1.1% in September and rose at a faster annualized rate in the third quarter than they did the previous quarter. High corporate profits are enabling businesses to make capital investments on equipment and facilities that can lead to future growth.
The Commerce Department Thursday said the median price for a new home sold in September fell 9.7% to $217,100 from a year earlier. That was the sharpest year-to-year drop since December 1970.
At the same time, though, new-home sales rose a second straight month in September, jumping 5.3% to a seasonally adjusted annual rate of 1.075 million homes. It marked the second consecutive increase in sales following three months of declines.
In another hopeful sign, inventories of unsold homes and new homes decreased. According to Commerce data, there were an estimated 557,000 homes for sale at the end of September, representing a 6.4 months' supply at the current sales rate. That represents a 1.9% decline in inventories over August, the sharpest decline since December 2000.
The declines in housing prices underscored the severity of the correction in the once-booming market, which had seen sales of both new and existing homes soar to record levels for five consecutive years, propelled by the lowest mortgage rates in more than four decades. This year, rising mortgage rates have helped cool sales.
A 7.8% surge in durable goods orders last month, to a seasonally adjusted $226.70 billion, meanwhile, was largely due to a jump in transportation orders -- specifically commercial aircraft -- which rose 27.6% in September over the previous month. Durable goods orders fell the two previous months.
A.G. Edwards & Sons economist Gary Thayer said the 0.1% increase in durable goods excluding transportation orders is "more representative of the manufacturing economy right now -- still soft, consistent with moderate economic growth."
In other economic news, the Labor Department Thursday said the number of new applicants for unemployment insurance benefits rose last week, suggesting labor markets remain relatively healthy. Initial jobless claims rose 8,000 to a seasonally adjusted level of 308,000 in the week ended Oct. 21.
"These data still portray a relatively tight labor market, tighter than indicated by the recent growth in payroll employment," Steven Wood, chief economist at Insight Economics, said in a research note.
Last Month as Prices Plunged
By JEFF BATER and BENTON IVES-HALPERIN
October 26, 2006
WASHINGTON -- The median price of a new home plunged in September from a year earlier by the largest amount in more than 35 years. But in a sign that the housing market could be nearing bottom, the pace of sales rebounded for a second month.
Orders for durable goods, such as cars and computers, surged 7.8% in September over the previous month, the largest gain since June 2000. Virtually all the strength came from a giant increase in commercial aircraft orders; outside of transportation, orders inched up 0.1%.
Thursday's data suggested that the economy is still growing, albeit at a moderate pace. That is the scenario sought by the U.S. Federal Reserve, which on Wednesday decided to hold short-term interest rates steady for a third straight month.
"Looking forward, there has been a significant improvement in the overall investment climate in the past month and a half -- inflation uncertainty has declined, long-term interest rates have moved down and the Fed has kept interest rates on an even keel," Brian Bethune, an economist at Global Insight, wrote in a research note.
Indeed, the Commerce Department's measures of shipments and orders of "core" capital goods, or those excluding aircraft and defense, suggest business investment is picking up and that the economy may regain some momentum in the fourth quarter after a tepid third quarter.
Shipments of core capital goods plunged 2.1% in September and increased at a slower annualized rate in the third quarter than they did in the second. But orders jumped 1.1% in September and rose at a faster annualized rate in the third quarter than they did the previous quarter. High corporate profits are enabling businesses to make capital investments on equipment and facilities that can lead to future growth.
The Commerce Department Thursday said the median price for a new home sold in September fell 9.7% to $217,100 from a year earlier. That was the sharpest year-to-year drop since December 1970.
At the same time, though, new-home sales rose a second straight month in September, jumping 5.3% to a seasonally adjusted annual rate of 1.075 million homes. It marked the second consecutive increase in sales following three months of declines.
In another hopeful sign, inventories of unsold homes and new homes decreased. According to Commerce data, there were an estimated 557,000 homes for sale at the end of September, representing a 6.4 months' supply at the current sales rate. That represents a 1.9% decline in inventories over August, the sharpest decline since December 2000.
The declines in housing prices underscored the severity of the correction in the once-booming market, which had seen sales of both new and existing homes soar to record levels for five consecutive years, propelled by the lowest mortgage rates in more than four decades. This year, rising mortgage rates have helped cool sales.
A 7.8% surge in durable goods orders last month, to a seasonally adjusted $226.70 billion, meanwhile, was largely due to a jump in transportation orders -- specifically commercial aircraft -- which rose 27.6% in September over the previous month. Durable goods orders fell the two previous months.
A.G. Edwards & Sons economist Gary Thayer said the 0.1% increase in durable goods excluding transportation orders is "more representative of the manufacturing economy right now -- still soft, consistent with moderate economic growth."
In other economic news, the Labor Department Thursday said the number of new applicants for unemployment insurance benefits rose last week, suggesting labor markets remain relatively healthy. Initial jobless claims rose 8,000 to a seasonally adjusted level of 308,000 in the week ended Oct. 21.
"These data still portray a relatively tight labor market, tighter than indicated by the recent growth in payroll employment," Steven Wood, chief economist at Insight Economics, said in a research note.
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