New Home Sales Up 23.6 Percent in June

Home buying surged in June after a May plunge caused by the end of a government tax credit, according to a better-than-expected report on the ailing housing sector, the Commerce Department said Monday.

Sales increased 23.6 percent from the previous month to a seasonally adjusted annual rate of 330,000. Inventories fell, a hopeful sign.

While the sales level was the second lowest on record since 1963, the unexpectedly strong increase offered a glimmer of hope about a sector stuck in the doldrums.

Joblessness in the U.S. continues to restrain big purchases, despite low mortgage rates. Economists surveyed by Dow Jones Newswires had estimated sales would climb in June by 3.7 percent to 311,000.

May sales fell 36.7 percent to a record 267,000, revised down from an originally reported 32.7 percent plunge to 300,000. The sharp drop followed buyers rushing to the market before the tax credit ended April 30, causing sales to soar in the spring.

Year over year, sales in June were down 16.7 percent.

The median price for a new home declined, year over year, in June by 0.6 percent, to $213,400 from $214,700 in June 2009.

Prices could fall more if the supply of unsold homes keeps rising. A steady decline in prices can hurt sales. Would-be buyers will wait for a better deal and some owners will keep their property off the market until prices rise. Also, lower home values tend to make owners feel less wealthy, undercutting the desire to spend money.

However, the data Monday showed inventories of new homes fell, dropping by 1.4 percent in June to an estimated 210,000 homes for sale, from 213,000 at the end of May. The month's supply at the current sales rate dropped to 7.6 from 9.6 in May.

Regionally, new-home sales increased 20.5 percent in the Midwest, 33.1 percent in the South and 46.4 percent in the Northeast.

Sales fell 6.6 percent in the West.