New-home sales hit 10-month high by Elizabeth Strott 08-26-2009

New-home sales hit 10-month high
Inventories fall to lowest level in 16 years.
By Elizabeth Strott
Wednesday, August 26, 2009

Sales of new homes surged 9.6% in July, to a seasonally adjusted annual pace of 433,000, the Commerce Department reported this morning, the biggest monthly gain since February 2005. July's sales pace was also the highest since September 2008.

Economists had expected a 1.6% gain to 390,000 sales in July.

"The housing market is bottoming out," Conrad DeQuadros, a senior economist at RDQ Economics in New York, told Bloomberg News. Still, "it's not going to turn around very quickly," he cautioned.

Over the past five months, new-home sales have been on a 373,000-unit annual pace, up from 358,000 in the five months through June. In 2008, 485,000 new homes were sold, about 38% fewer than the 776,000 sold in 2007.

New-home sales were down 13.4% from July of last year.

The median price of a new home fell 12% to $210,100 from $237,300 in July 2008. Sales of new homes declined 13% in July from last year.

The ratio of new houses for sale to houses sold -- also known as supply -- was 7.5 months in July, the lowest level since April 2007 and down from 8.5 months in June. A balanced, healthy market is about six months' supply; the market hit four months during the housing boom of 2006. In the following years of the housing slump, however, supply rose to 10 to 11 months.

There were about 271,000 new homes on the market last month, the fewest since March 1993.

Homebuilder stocks were higher on the report. Toll Bros. (TOL) was up 73 cents, or 3.3%, to $23.04, Pulte Homes (PHM) shares had added 28 cents, or 2.1%, to $13.34, and Hovnanian Enterprises (HOV) gained 29 cents, or 6.4%, to $4.86.

On Tuesday, the S&P/Case-Shiller home price index of 20 major U.S. cities showed prices rose 1.4% in June, the second monthly gain in a row after declines every single month for three years.