WASHINGTON (REUTERS) - Sales of new single-family homes in America rose last month but held near their lowest levels this year, a sign that a sharp rise in interest rates is weighing on the United States economy.
Sales rose 7.9 per cent to an annual rate of 421,000 units, the Commerce Department said on Wednesday. The pace of sales was in line with analysts' expectations and supported the view that rising mortgage rates were taking steam out of America's housing recovery.
Last month's increase in new home sales did not make up for the steep drop registered in July, when the pace of sales was the weakest since October. Mortgage rates surged beginning in May, when the Federal Reserve gave signals it was thinking of winding down a bond-buying stimulus programme.
The Fed surprised financial markets last week when it said it would put off reducing monthly bond purchases for now. Policymakers said rising borrowing costs played a role in their decision.
The housing market, which has been a major drag on America's economy since the 2007-2009 recession, appeared to turn a corner early last year when home prices began to rise. Last month, the median price for a new home sale fell to US$254,600 (S$319,207). The median sales price, which is not adjusted for seasonal swings, has fallen every month since May, although is still up slightly from August last year.
The inventory of new homes for sale increased by 3.6 per cent last month from July, leaving the stock of unsold new homes at its highest level since March 2011.