Date:-28-Dec-2009

US buyers continue to favour existing homes over new build
 

In November official figures showed decline in new home sales as buyers favoured distressed and foreclosed properties.
 

Separately on Wednesday, personal incomes in the US recorded their biggest gains in six months in November as the labour market began to improve and consumer spending continued to thaw.

New home sales dropped by 11.3 per cent to an adjusted annual rate of 355,000, commerce department figures showed. he disappointing housing data shows how sales of existing homes, which rose last month, have cannibalised new home sales. The figures also showed the impact of expectations that the first-time home buyer tax credit would expire in November. It was eventually extended into April 2010.

A bright note on Wednesday was that the median price of a new home in the US rose by 3.82 per cent to $217,400 from October to November. That was clouded, however, by a rise in housing inventory, which rose to a 9.5-months-supply at the current sales rate.
 

Meanwhile, incomes rose by 0.4 per cent to $49.7bn in November, silghtly behind economists’ expectations but stronger than the prior month, according to commerce department figures. Workers benefited from the slowing pace of lay-offs and employers who began to increase their hours.

Consumer Spending Continues to Rise
Personal consumption expenditure also continued to climb, rising by 0.5 per cent, as holiday discounts succeeded in luring shoppers. Consumer spending has risen in six of the past seven months. With spending and incomes tracking each other closely, the savings rate held steady at 4.7 per cent in November.

“There is no evidence that the consumer is seeking to ramp the savings rate higher and we attribute this to the recovery in equity prices and the stabilisation in home prices, which has restored a degree of wealth cushion to US households,” said John Ryding and Conrad DeQuadros, economists at RDQ Economics.

Consumer spending accounts for about 70 per cent of economic activity in the US. On Tuesday, revised government figures showed that the US economy had grown at an adjusted annual rate of 2.2 per cent in the latest quarter. Analysts forecast that gross domestic product could grow by more than 4 per cent if consumer spending keeps rising at this rate.
 

Source: The Financial Times