Fall in US homes sales not likely to reverse improving trend (Sept 25, 2009)

KUALA LUMPUR: The drop in US home sales in August from the previous month could just a be “a temporary blip in the improving trend rather than a sign of renewed weakness,” said US Economist Paul Dales of Capital Economics Ltd based in Toronto.

Sales have still risen in five of the last seven months and are 13.6% above January's trough. August's modest fall therefore does little to reverse the recent upward trend, he added.

Some of the increase from the trough has been driven by the tax credit for first-time buyers. “Demand is also being boosted by the most recent fall in mortgage rates to below 5%, suggesting the pace of the recovery may slow once the tax credit expires at the end of November if it isn't extended, the upward trend will continue,” Dales said.

The month’s supply of homes for sale fell from 9.3 in July to 8.5 in August, leaving it even further below November's peak of 11.0.

However, home sales remain 30% below their peak. “The fall back in August illustrates that the recovery is going to be gradual and patchy rather than quick and firm,” he said.