Sales of new U.S. homes in decline

July 30, 2007 - 0:0

WASHINGTON (bbc) -- Troubles in the U.S. housing market are showing signs of spreading Sales of new US homes fell in June for the largest amount in five months as housing market woes continued.

Sales sank 6.6% to an annual rate of 834,000, according to figures from the US Commerce Department. This was more than triple what was expected and comes as banks start to tighten their lending rates in the wake of rising defaults. US consumers, hit by rate rises, are waiting for further house price falls before they buy, analysts say. Prices of newly-built homes fell 2.2% last month to $237,900 (£116,202) as house builders continued to offer heavy incentives to shift an oversupply of stock, which is putting pressure on an already strained market. But despite their efforts to mop up the overhang, the inventory of unsold new homes was static for June at 537,000 units. Deeper slump The disappointing numbers come a day after data was published showing sales of existing homes in the US during June fell to the slowest pace since November 2002. ""It is a continuation of a downtrend - the decline was more than many people had expected,"" said Kevin Logan, an economist at Dresdner Kleinwort. ""What it is telling us is that the overall slump in the housing market is deeper and is likely to be more prolonged than many people had anticipated."" Markets will now focus on US economic growth numbers due out on Friday to gauge the extent to which the problems in the US housing market have filtered through to the broader economy.