September New Home Sales Rise by 2.7 Percent

Sales of new single-family homes rose by 2.7 percent last month to a seasonally adjusted annual rate of 464,000 homes.

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Sales of new homes unexpectedly rose last month, as many homebuyers seized on builder discounts and rushed to take advantage of expiring down payment assistance programs and other incentives.

Economists had expected sales of new, single-family homes to drop from August levels, but instead they rose 2.7 percent in September to a seasonally adjusted annual rate of 464,000 homes, the Commerce Department reported Monday.

Many homebuilders had ramped up incentives in August and September to capitalize on the end of seller-funded down payment assistance programs on Oct. 1. Builders also likely benefited from another factor motivating homebuilders: an increase from 3 percent to 3.5 percent in the down payment required to qualify for a Federal Housing Administration-insured loan, which also took effect Oct. 1.

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Builders' discounts helped push down the median price of a new home to $218,400, or 9.1 percent below what it was a year ago. That means prices have rolled back to what they were four years ago.

Despite the surprising increase in September, sales were still 33 percent below a year ago and off almost 68 percent from the peak in July 2005.

The positive upward turn in sales was blunted somewhat by the government's decision to revise August sales to a decline of 12.6 percent — sharply lower than the initial estimate.

The housing market is the worst it has been in decades, and tight credit markets, souring consumer confidence, and rising unemployment haven't helped.

"We still have a very difficult road ahead that will require additional government action to speed the recovery of housing and the national economy," Sandy Dunn, chairman of The National Association of Home Builders, said in a statement.

The trade group renewed its call for Congress to enact a new housing stimulus package to help spur homebuyers.

Last Friday, the National Association of Realtors said sales of existing homes rose 5.5 percent in September, the largest monthly gain in more than five years.