US new home sales rise

 

Demand for new US homes rose more than forecast in May as mortgage rates dropped, bolstering the residential real-estate market while other parts of the world's largest economy cool.

Purchases climbed to a 369,000 annual rate, up 7.6 per cent from the previous month and the most since April 2010, the Commerce Department reported today.

The months' supply dropped to the lowest in more than six years.

Falling borrowing costs and more affordable properties may keep luring buyers, even as a cooling job market and limited access to credit restrain the recovery.

In a bid to reduce unemployment, sustain housing and prevent a global slowdown from stalling the expansion, the Federal Reserve last week extended a program to keep long-term interest rates low.

"Things are definitely improved," Jed Kolko, chief economist at San Francisco-based Trulia, which tracks home sales, said before the report.

"There's some good news on prices, and rising prices are a strong cue for developers."

Stocks held earlier losses after the report amid concern that a meeting of European leaders later this week will fail to help contain the region's debt crisis.

The Standard and Poor's 500 Index dropped 1.3 per cent to 1,318.28 at 10.01am in New York.

Bloomberg