Oct. 28 (Bloomberg) -- Sales of new U.S. homes unexpectedly fell in September, a sign the housing recovery may lose momentum after a government tax credit expires.
Sales decreased 3.6 percent to a 402,000 annual pace, lower than the median forecast of economists surveyed by Bloomberg News, figures from the Commerce Department showed today in Washington. The median price of a new home dropped 9.1 percent from September 2008.
Contracts signed last month will probably not be able to close before an $8,000 first-time homebuyer tax credit expires at the end of November, raising concern the market will retrench in coming months as unemployment and foreclosures climb. Economists view stabilization in housing as key to any rebound from the worst recession in seven decades.
The report "tempers enthusiasm about the rebound in housing," said Richard DeKaser, chief economist at Woodley Park Research in Washington, whose forecast was the lowest among economists surveyed. "Key to keeping the market on track is extending the credit and sustaining low mortgage rates."
Stocks fell following the disappointing sales report. The Standard & Poor's 500 Index was down 0.5 percent to 1,057.68 at 10:17 a.m. in New York. Treasury securities rose.
New-home sales were forecast to rise to a 440,000 annual rate, according to the median forecast of 75 economists in the Bloomberg survey. Estimates ranged from 412,000 to 460,000 after an initially reported 429,000 rate in July. Last month's pace was the lowest since June.
A second Commerce Department report showed orders for durable goods rose 1 percent in September, a fourth gain in the past six months and signaling factories are helping ring in an economic recovery.
The median price of a new house fell to $204,800 compared with $225,200 at the same time last year. The value was up 2.5 percent from the prior month, reflecting a plunge in the share of houses selling for less than $150,000, a category that often includes first-time buyers.
Sales of new homes were down 7.8 percent from September 2008.
The decrease in sales was led by an 11 percent drop in the West and a 10 percent decrease in the South. Purchases in the Midwest jumped 34 percent and were unchanged in the Northeast.
Builders had 251,000 houses on the market last month, the fewest since November 1982. It would take 7.5 months to sell all homes at the current sales pace, the same as in August.
Sales of new homes, which make up less than 10 percent of the market, are tabulated when a contract is signed and may therefore begin cooling weeks before the Nov. 30 deadline by which buyers must close a transaction to be eligible for the tax credit.
Sales of existing homes, which account for the remainder, are counted when sales close and thus reflect contracts signed a month or two earlier.
Previously owned homes in September sold at a 5.57 million pace, up a record 9.4 percent from the prior month, the National Association of Realtors reported last week in Washington. The level of sales was the highest in more than two years.
Lobbying for Extension
The Realtors' group and the National Association of Home Builders are lobbying to extend the first-time homebuyers credit on concern demand will wane after it lapses. Lawmakers have joined in.
Senate leaders this week were negotiating to extend the tax credit through 2010, Senator Bill Nelson of Florida said. "We should be able to extend that later this week," Nelson, a Democrat, told reporters.
Housing-related companies are still trying to recover. Caterpillar Inc., the world's largest maker of bulldozers and excavators, last week said its third-quarter earnings fell by more than half from a year earlier while it boosted its full year forecast.
"We believe the third quarter marked the low point for Caterpillar sales and revenues in what has been the toughest recession since the 1930s," Chief Executive Officer Jim Owens said in a statement. "We are seeing encouraging signs that indicate a recovery may be under way."
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