Home Prices Weaken, Sales Rise

(New-home sales item updated with further analyst commentary.)

NEW YORK, N.Y. (TheStreet) -- Sales of newly built homes rose 23.6% in June to a seasonally adjusted rate of 330,000, the Commerce Department said Monday. The figure came in ahead of expectations for a rate of 320,000 after a revised record-low rate of 267,000 units sold in May.

The better-than-expected data helped lift shares of certain homebuilders Monday. The SPDR S&P Homebuilders(XHB), an exchange-traded fund that tracks the homebuilder sector, rose 2.2% in late-afternoon trading. Shares of NVR(NVR) and Lennar(LEN), among the XHB's top holdings, bid up 0.5% and 2.9%, respectively. Fellow builders KB Home(KBH) and Toll Brothers(TOL) were both up several points.

"There's no question that this is a weak number, but it seems to be more stable," said PNC Financial Services Group chief economist Stuart Hoffman. "The bottom line to all of this is that we need more jobs."

While any increase in the rate of home sales is seen as a good sign for the economy and housing market in general, the uptick in June home sales still represented the second-weakest month on record after May's depressed figures. It was also 76.3% lower than the 1.4 million-peak in July 2005, at the height of the housing bubble.

"It shows a little bit of a bounce back from historical lows following the removal of some of the tax incentives," said Commonfund senior economist Michael Strauss. "The impressive thing is that we could get at least some pick up in spending although it is still a very very low level."

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The still-struggling housing market saw sales ramp up in March and April as consumers rushed to take advantage of federal tax credits that offered as much as $8,000 for first-time home buyers. Those credits expired April 30, leading to a dramatic decline in demand for the month of May. Some of that weakening clearly spilled over into June but not as severely as in the prior month.

New home sales rose 46% in the Northeast, 33% in the South and 21% in the Midwest, while sales in the West declined by nearly 7%.

"One month doesn't make a trend, and the roadblocks to a healthy housing market are high -- the most important one being the still-high jobless rate," noted BMO Capital Markets economist Jennifer Lee. "But with borrowing costs at record lows, prices also remaining low, those with jobs who can afford a home may be enticed."