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UPDATE 1-US new home sales soar, prices post record drop
May 24, 2007 / 2:51 PM / 10 years ago

UPDATE 1-US new home sales soar, prices post record drop

(Adds background, details, analyst comment)

By Patrick Rucker

WASHINGTON, May 24 (Reuters) - Sales of new U.S. homes rose 16.2 percent in April, the sharpest climb in 14 years, while prices fell a record 11 percent, according to a government report on Thursday that showed home builders taking extraordinary steps to move houses.

New single-family home sales rose to an annual rate of 981,000 units from a revised rate of 844,000 in March, the Commerce Department said.

Analysts polled by Reuters were expecting April sales to rise slightly to an 860,000 unit pace from a previously reported rate of 858,000 units in March.

In April, the median sales price of a new home fell $28,500 to $229,100 from $257,600 in March. That’s the lowest price for a new home since September 2006 when the median sales price was $226,700. The previous record decline was a 9.4 percent fall-off in September 1981.

Compared with a year ago, April’s sales price was off 10.9 percent -- the fourth-largest decline ever. The record 14.6 percent decline was set in July 1970 and the next three largest falls occurred in that same year.

Several analysts looked past the price decline to read Thursday’s report as a return to health in the housing sector.

“The housing market seems to be bottoming out. The worst is clearly behind us in terms of the decline in home sales and construction activity,” said Mark Vitner, senior economist with Wachovia Securities in Charlotte, North Carolina. “Builders still have too much in inventories so that’s why we are seeing the decline in price.”

Earlier on Thursday, luxury home builder Toll Brothers (TOL.N) posted a 79 percent drop in quarterly net income, and chief financial officer Joel Rassman noted uncertainty surrounding sales pace and market direction.

The Dow Jones home construction index .DJUSHB was up 3 percent and the Dow Jones building materials index .DJUSBD was up 1.3 percent after data showing new home sales increased more than expected last month.

U.S. Treasury debt prices extended losses after the report hinted at unexpected strength in the housing market, while the dollar rose.

There were 538,000 new homes for sale in April, a fall from the 546,000 reported in March. It would take 6.5 months to clear that inventory at the current sales pace, less than the 8.1 months recorded in March.

Thursday’s data comes a day ahead of another key report that measures the pace of existing home sales -- which represent 85 percent of the housing market. Analysts polled by Reuters are expecting the data to show April existing home sales to rise to a 6.14 million unit pace from the 6.12 million in March when it is released Friday.

New home sales were mostly up across the regions, with the South recording the largest gain at 27.8 percent. The Midwest saw a decline of 4.0 percent while the Northeast was up 3.8 percent and the West was up 8.5 percent. (Additional reporting by Richard Leong in New York)

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