US new home sales rocket

SALES of new homes in the US surged to a seven-month high in June, while the inventory of homes for sale fell to its lowest level in more than 11 years, official data showed yesterday, boosting hopes that the US housing market may finally be starting to stabilise. <br /><br />Government figures indicated an 11 per cent monthly rise in the sale of new homes to 346,000 while the number of new homes still for sale fell to 281,000, the lowest since February 1998. <br /><br />Elsewhere, the recent&nbsp; improvement in the National Association of Home Builders&rsquo; (NAHB) survey suggests that sales might even reach the 400,000 mark soon. But Capital Economics senior US economist Paul Ashworth notes that &ldquo;even 400,000 would be less that a third of what sales were at the height of the boom in late 2005&rdquo;.<br /><br />ING economist Dimitry Fleming thinks that a true recovery in US housing is not possible until the supply overhang has been sufficiently addressed. &ldquo;Production has already been slashed to incompressible levels, so further progress in reducing the overhang should come from a pickup in sales, but tight credit, job distress and fierce competition from cheap foreclosed existing homes pose a threat to a further recovery,&rdquo; he said.<br /><br />Monthly data from the Equifax credit bureau underlines how much of a threat this will be for the US housing market.<br /><br />Equifax data showed that among US homeowners with mortgages, 7.23 per cent were at least 30 days late on payments in June, up from about 4.5 per cent a year earlier and 7.01 per cent in May. The rate of sub-prime mortgage delinquencies jumped to 39.25 per cent in the month.