New home sales rebound

updated 10:49 a.m. ET Oct. 25, 2007

WASHINGTON - Sales of new homes posted an unexpected gain in September although the improvement came after sales had fallen to the slowest pace in more than a decade.

The Commerce Department reported Thursday that sales of new homes rose by 4.8 percent last month to a seasonally adjusted annual rate of 770,000 units. That level of activity was still 23.3 percent below a year ago, indicating that housing remains in a steep downturn.

Analysts had been expecting sales would fall by 2.5 percent last month from an August sales pace that had originally been reported as 795,000 homes. However, that figure was revised sharply lower in the new report to show a sales rate of just 735,000 in August, the slowest sales pace in 11 years.

Meanwhile, orders for big-ticket manufactured goods dropped an unexpected 1.7 percent last month following an even bigger 5.3 percent plunge in August. The first back-to-back declines in factory orders in more than a year raised new worries about how much harm would be inflicted on the economy from a severe housing slump and credit crunch.

In a third report, the Labor Department said that the number of newly laid off workers filing claims for unemployment benefits fell by 8,000 last week to 331,000.

The report on home sales showed that the median new home price in September _ the point where half the homes sold for more and half for less _ rose to $238,000, up 2.5 percent from August, which had seen prices fall to the lowest level in nearly a year.

The rebound in home sales was led by a 37.7 percent surge in the West. Sales were also up 0.5 percent in the South. But sales of new homes fell by 19.5 percent in the Midwest and 6.6 percent in the Northeast.

The September drop in orders for durable goods reflected weakness in such areas as autos, fabricated metals, computers and electronics products, and electrical appliances.

That decline followed several other reports showing economic weakness, including continued steep slides in sales of existing homes and reports from banks and investment houses that they were having to take big write-offs due to losses in such areas as mortgage-backed securities.

MORE FROM REAL ESTATE

Real estate Section Front

NYC tops the list of America’s costliest cities Citigroup to suspend foreclosures for 30 days Mortgage rates remain below 5 percent Construction of new homes rebounds Homebuilder outlook dips despite tax credit Detroit artists use city’s blight as canvas Real estate firm Fairfield files for bankruptcy Mortgage relief slow in coming to many Foreclosure activity falls for fourth month Few helped by Obama’s mortgage relief plan Real estate Section Front   Add Real estate headlines to your news reader: