Home sales tumble again, but slight fall raises hope

The Commerce Department reported Friday that sales of new single-family homes dropped by 0.6 percent last month to a seasonally adjusted annual rate of 530,000 units. That was less than half the decline that had been expected and the May performance was revised up a bit.

Even with the changes, new-home sales were down 33.2 percent from a year ago, showing how severe the slump in housing has become.

But some analysts said they saw cause for optimism that the worst of the decline could be drawing to a close, especially if a sweeping housing rescue package now pending in Congress can slow a flood of foreclosures and spur sales to first-time home buyers.

Analysts noted that not only was the overall decline in June from May less than expected, but sales were up in two of the four regions of the country.

Brian Bethune, chief U.S. financial economist at Global Insight, said the numbers gave a “few positive flickers, but the housing market remains extremely fragile.”

The nation is enduring a steep downturn in housing that has pushed the overall economy close to a recession. It has also triggered a severe credit crunch, forcing U.S. financial institutions to cope with billions of dollars of losses from bad mortgage loans.

Investors were also bolstered by some good news about consumers. The Reuters/University of Michigan index of consumer sentiment for the first part of July came in at 61.2, slightly better than the 28-year low of 56.4 hit in June.

The report on new-home sales showed that the median price of a new home sold in June fell by 2 percent compared with a year ago.

Sales were down the most in the South, a drop of 2 percent, with sales falling 0.9 percent in the West. These declines were offset somewhat by sales increases of 5.3 percent in the Northeast and 2.5 percent in the Midwest.

The Commerce Department also reported Friday that orders to factories for big-ticket manufactured goods such as cars, appliances and machinery increased by 0.8 percent in June, the strongest gain in four months. But excluding demand for defense equipment, total orders would have been up 0.1 percent.

Analysts said that the June performance for durable goods was being propped up by sizable military spending for equipment, reflecting the ongoing wars in Iraq and Afghanistan, and this was offsetting widespread weakness in the rest of the economy.

“With orders excluding defense falling at a 4 percent annualized rate in the second quarter, it is pretty clear manufacturing is hardly thriving,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.