US January new-home sales probably rose on credit extension

WASHINGTON: Sales of new homes in the US probably rose in January as an extension of a first-time homebuyers’ tax credit spurred demand from a nine-month low, economists said before a report on Feb 24.

Purchases increased 3.5% to an annual pace of 353,000 new homes, according to the median estimate of 71 economists surveyed by Bloomberg News. Demand slumped 7.6% in December, the month after the incentive was originally scheduled to expire.

Expansion and extension of the credit covering contracts signed by the end of April may give housing a further lift in coming months. Sustained growth in home sales will require payroll gains after the loss of 8.4 million jobs the last two years.

“We expect a bumpy ride for the housing market but for the recovery to stay on course,” said Michelle Meyer, a senior economist at Barclays Capital Inc in New York. January will “be payback from the sharp decline in December and we suspect the tax credit should start to boost new sales”, she said.

The Commerce Department’s report was due at 10am in Washington on Feb 24, the same time US Federal Reserve Chairman Ben S Bernanke delivers his semiannual testimony to Congress on the economy. Survey estimates ranged from 325,000 to 386,000.

Bernanke will likely repeat the central bank’s pledge to keep interest rates low for “an extended period,” to help nurture the recovery.

Housing, the industry that spawned the subprime mortgage meltdown and triggered the worst recession in seven decades, began to recover in 2009 after a three-year decline.

Purchases of new homes fell to a record low 329,000 pace in January 2009, down from an all-time high of 1.39 million homes in July 2005. Their highest level last year was 419,000 in July. – Bloomberg LP