Falling Home Prices Fail to Spur Buying
NEW YORK ( TheStreet) -- Falling home prices aren't enticing Americans to buy up new property.
The government's latest read on new-home sales in September came in a little better than expectations, but offered no reason to get excited about a rebound in the housing sector. The report reflected a troubling trend that Americans are reluctant to invest in new homes amid a weak economic backdrop.
New home sales jumped 5.7% to 313,000 from a revised 296,000 in August, according to the Commerce Department. The consensus estimate was for 300,000 units, according to Reuters.However, as BTIG Economics notes: "It is worth reminding people though that at their peak, new home sales were running north of 1.3 million." BTIG also points out that median prices dropped by 3% in September, marking the third straight month that prices have slipped. On a year-to-year basis, the decline is even more apparent -- home prices have plunged more than 10%. Americans remain reluctant to invest in property given the high level of unemployment in the economy. Furthermore, sellers of new homes continue to compete with a glut of foreclosed homes and cheaper prices on the market. BTIG concludes that lower mortgage rates have failed to spur the housing sector. "The cost of money does not matter," writes the research firm. "If 30-year mortgage rates of 4% or less is not enough to spur housing activity, one must wonder what will?" "It is hard to get optimism right now about this sector," writes David Semmens, U.S. economist with Standard Chartered Bank, in a research note. "Mortgage lending remains weak and consumers are cautious; hardly the recipe for a housing comeback." Despite the larger troubling trend, investors received the government report well. The dollar gained some traction against the yen and stocks moved slightly higher after the government's report. -- Written by Chao Deng in New York. >To contact the writer of this article, click here: Chao Deng. >To follow the writer on Twitter, go to:
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