New Homes sales dip, Prices rise to record levels – KBH, BZH, DHI, RYL

Data from the U.S. Commerce Department showed that the sale of new homes in the country fell in August, but prices held close to five-year highs, pointing to a recovery in the sector.

According to the data on new home sales released on Wednesday , new home sales fell 0.3 percent to 373,000 units compared to 374,000 in July, a rate that had been revised upward.

Sales showed an increase of nearly 28 percent from a year earlier.

The dip in demand however was not accompanied by a commensurate dip in prices. On the contrary, median price of a new home rose a record 11.2 percent in the month to $256,900, the highest level since March 2007, just before the housing bubble burst.

The sale price was higher by 17 percent from the year ago period, registering the fastest rise since December 2004.

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Analysts are taking this to mean resurgence in customer interest. The housing market collapsed in 2006/07 with the sub-prime mortgage crisis which showed that mortgage lenders had lent money to risky borrowers, with a poor credit profile.

Resales of existing homes also showed a strong trend in August according to the data with homebuilder sentiment jumping to a six-year high in September.

Economist however said that while the housing sector was showing renewed activity and signs of recovery, there was not enough demand for it to drive the recovery in the country’s economy as a whole.

The manufacturing sector is still weak and the housing sector has been unable to compensate for that. The Federal Reserve targeted housing this month as a channel to spur faster economic growth.

Beazer Homes USA, Inc.(NYSE:BZH) shares slumped3.85% to $3.50, D.R. Horton, Inc.(NYSE:DHI) lost about 4% $20.90, The Ryland Group, Inc.(NYSE:RYL) was down 5.70% to $30.01, KB Home(NYSE:KBH) lost 3.54%.