September 26, 2011 / 2:45 PM / 8 years ago

WRAPUP 2-U.S. new home sales hit 6-month low, prices drop

* U.S. new single-family home sales fall 2.3 pct in Aug

* Decline in sales despite low mortgage rates (Adds euro zone comment, details from housing report, background)

By Jason Lange

WASHINGTON, Sept 26 (Reuters) - Sales and prices of new single-family U.S. homes fell in August despite historically low mortgage rates, underscoring the difficulties policymakers face in efforts to boost the moribund housing sector.

A stagnant job market and a big overhang of unsold existing homes have combined to keep new home sales on the rocks even as mortgage rates returned to lows not seen since at least the early 1970s.

New home sales slipped 2.3 percent last month to a 295,000 annual rate, a six-month low, the Commerce Department said on Monday. That was in line with analysts’ forecasts and did little to allay fears the United States could slip back into recession.

The median sales price also moved lower from the previous month and was 7.7 percent below year-ago levels.

“There’s no sign yet that low mortgage rates are helping the housing sector,” said Gary Thayer, a strategist at Wells Fargo Advisors in St. Louis, Missouri.

The U.S. Federal Reserve last week unveiled new measures to ease credit further for home buyers, but analysts caution that the level of mortgage rates is not the main hurdle to buying.

Many economists are skeptical attempts to lower rates will help much because millions of Americas owe more on their mortgages than their homes are worth, which can effectively chain them to their properties while also preventing them from refinancing to lower their monthly costs. [ID:nS1E78M0WC]



Graphic - new home sales:

Graphic-home sales new, existing:


Heavy debts taken on during the housing boom in the previous decade are also making consumers cautious to spend.

After economic growth slowed sharply in the first half of the year, the United States looks especially vulnerable to any escalation in the European debt crisis.

The S&P 500 stock index .SPX rose despite the poor data as global equities climbed on hopes that Europe was tackling Greece's debt woes.

Euro zone officials are working on ways to magnify the financial firepower of their bailout fund to fight the region’s sovereign debt crisis more effectively.

In its monthly report on single-family home sales, the U.S. government raised its estimate for July’s sales pace slightly to 302,000 units. Also, the supply of homes available on the market in August dropped to a record low.

Data last week showed new construction of U.S. homes fell in August, dragging on economic growth.

“The housing sector can’t get any worse,” said Michael Englund, an economist at Action Economics in Boulder, Colorado. (Additional reporting by Ellen Freilich and Richard Leong in New York; Editing by Neil Stempleman) (; Tel: +1 202 310 5487; Reuters Messaging:

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