New Home Sales Rose In September, But Don't Get Too Excited

This all happened before the world fell apart.

Bloomberg: Sales of new houses in the U.S. were unexpectedly rising before credit markets froze this month, having rebounded from a 17-year low thanks to a drop in prices.

Purchases increased 2.7 per cent in September to an annual rate of 464,000 from 452,000 the prior month that was less than previously estimated, the Commerce Department said today in Washington. The median sales price decreased to a four-year low.

The sales increase may be short-lived after the collapse of Lehman Brothers Inc. in the middle of last month led to a slump in lending among banks, making it harder to get a mortgage. Tumbling stock prices and mounting job losses signal some of these prospective buyers may walk away from their purchase contracts.

“Sales are likely to get a bit worse from here as the reports start to reflect the periods affected by the credit crisis,” said Russell Price, a senior economist at H&R Block Financial Advisors Inc. in Detroit. “Most of the contracts for new home sales in September were likely signed before the credit crisis really took hold.”

Economists had forecast new home sales would drop to a 450,000 annual pace from an originally reported 460,000 rate the prior month, according to the median estimate in a Bloomberg survey of 59 economists. Forecasts ranged from 400,000 to 501,000.

Stocks dropped on concern the global economic slump would deepen. The Standard & Poor’s 500 Index was down 8 points, or 1 per cent, to 868.4 at 11:56 a.m. in New York. Treasuries securities were little changed.

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