US new home sales fall to six-month low

New single-family home sales in the US fell to a six-month low in August in a sign the crippled housing market will not provide much support for the flagging economy any time soon.

The US Commerce Department said sales slipped 2.3 per cent to a seasonally adjusted 295,000-unit annual rate.

The reading was in line with analysts' forecasts and does little to allay fears the US could slip back into recession.

"This is an insignificant change in new home sales, statistically speaking. The trend in recent months has been dead flat,"said Ian Shepherdson, chief US economist at High Frequency Economics.

"We feared a much bigger drop in August, thanks to Hurricane Irene and the fallout
from the debt ceiling debacle/downgrade, so we are moderately relieved at this number. Still, the market is dead, and even record low mortgage rates are not doing anything to help."

The median price of sales slipped 8.7 per cent from July, with weak incomes and a moribund job market keeping households wary of investing in a new home.

The report keeps pressure on the Federal Reserve and President Barack Obama to do more to help the sputtering economy. The Fed last week unveiled new measures to try to ease credit further for homebuyers.

"Sales of new homes are still very depressed," said Gary Thayer, a strategist at Wells Fargo Advisors in St. Louis, Missouri.

Still, the government raised its estimate for July's sales pace to 302,000 units from the previously reported 298,000 units.

The supply of homes available on the market also dropped to a record low, but in the year to August, sales rose 6.1 per cent.

"Builders have responded by cutting new construction to a record low, so the months' supply number is a healthy-looking 6.6, but this ignores the huge supply of near-substitutes for new homes in the existing homes market," said Shepherdson.

Data last week showed new construction of US homes fell in August, dragging on economic growth.