US new home sales indicate market stabilising

Purchases of new homes in the US last month beat forecasts while supply declined to its lowest reading in six years, offering further positive indications of improvement in the country’s housing market.

Sales, which are calculated after contracts are signed, fell 0.9 per cent in January to an annual rate of 321,000. While the level is lower, it compares with a sharp upward revision of the December rate to 324,000, according to the Commerce Department. The January number came in higher than the expected 315,000 mark.

“Don’t read anything into the 0.9 per cent month-on-month fall in new home sales,” said Paul Dales, senior US economist at Capital Economics.

“Sales only fell because December’s estimate was revised up from 307,000. If all the revisions were concentrated in January, then sales would have risen by 8.1 per cent month-on-month. Moreover, sales are now at a level not seen for two years.”

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