The first signs of a bounce in the black hole known as the US housing market, or a another false dawn?

New home sales in the US rose by a faster than forecast 2.7% annual rate in September, adding to the impression from last week’s rise in existing home sales that low prices are bringing buyers back to the market.

Figures from the US Commerce Department showed that new home sales rose to an annualised rate of 464,000 units after dropping by a steep 12.3% in August. The supply of unsold homes also dropped, from 11.4 months’ backlog in August to 10.4 months’ last month.

But the median sale price for a new home fell to $US218,400, its lowest level in four years, but that’s usually associated with a clearing of the market.

But economists warned that the improvement in sales figures for new and existing homes could be a one off blip as they both reflect purchasing decisions started in July and August and completed last month. The sharper than expected downturn in new home starts and building permits for September should be seen as truer indication of the real state of demand for housing in the US.

The September figures will not reflect the way the credit crunch turned into a freeze in the wake of the Lehman Brothers collapse and the breakdown of financial systems in the US and around the world that remain badly fractured.

The most important measure of US home prices – the Standard & Poor’s Case-Shiller index – will be released tonight our time (for August) and will give a clear picture about house price movements, but even then we will have to wait until November and late December to see if the credit freeze had an impact on house prices in the US.

On Friday, the US National Association of Realtors said the pace of pre-owned home sales rose to a rate of 5.18 million annualised units in September, the highest level since the middle of last year. That was higher than the 4.9 million annualised unit rate forecast by the market.

But if there’s a rebound underway, it isn’t impacting the level of foreclosures in the US.

It’s still rising and remains the major problem, driving the destruction in value in so many industries and communities across the US.

In September, 81,312 homes were lost to foreclosure, according to the monthly report from RealtyTrac, the US group has compiles foreclosure figures.

RealtyTrac said that 851,000 US homes have been repossessed by lenders since August 2007.

It said that last month, 265,968 troubled borrowers received foreclosure filings — such as default notices, auction sale notices and bank repossessions. That’s a decline of 12% from August’s record, but 21% more than in September 2007.

All told 765,558 foreclosure filings were made on U.S. properties in the third quarter of this year — up 3% from the second quarter and 71% from the same period last year.

RealtyTrac said the pace of foreclosures being reported slowed as cooling off periods in California and a number of other states started having an impact.

But these new arrangements won’t cut the number of foreclosures, just slow the process down and force more talks between lender and customer. But because Americans can walk away from their houses, these delayed foreclosures will occurr in future months in most cases, leading to another surge, possibly in December and January.

Peter Fray

Get your first 12 weeks of Crikey for $12.

Without subscribers, Crikey can’t do what it does. Fortunately, our support base is growing.

Every day, Crikey aims to bring new and challenging insights into politics, business, national affairs, media and society. We lift up the rocks that other news media largely ignore. Without your support, more of those rocks – and the secrets beneath them — will remain lodged in the dirt.

Join today and get your first 12 weeks of Crikey for just $12.


Peter Fray
Editor-in-chief of Crikey