In the latest sign that the battered housing market is healing, sales of new homes in June jumped a bigger-than-expected 11% from May, and the inventory of new homes for sale continued to shrink.
Sales of new homes, driven largely by lower prices and mortgage rates, sold at a seasonally adjusted annual rate of 384,000 units last month, vs. 346,000 in May. It was the third month in a row of higher sales and the most robust sales pace since November 2008, which had an annual sales rate of 390,000 new homes, according to figures released Monday by the government.
Perhaps more important, the months supply of homes for sale fell to 8.8 months in June, down from 10.2 in May and the lowest monthly supply since October 2007. Housing experts said that is a sign that the inventory overhang that has put downward pressure on prices is abating somewhat. The “months supply” inventory yardstick is the amount of time it would take to sell the 281,000 unsold new homes now on the market at current sales rates.
While median new home prices continued to fall last month, dipping 12% from a year ago to $206,200, and are unlikely to stop falling until late in 2009 at the earliest, market watchers were upbeat about the drop in inventories of homes for sale.
“We are finally working through this excess inventory,” says Randall Guttery, professor of real estate at the University of North Texas. “Once we get that excess inventory taken off the market, we can get back to a more healthy supply-and-demand-driven market.” A supply of six to seven months of new homes for sale is deemed a healthy balance between buyers and sellers.
Sales got a boost from a government program that offers a federal tax credit up to $8,000 for first-time home buyers that close before the end of November.
The trend toward better housing data has raised hopes that the worst of the slump is finally over.
“Evidence is mounting that we have turned the corner for sales, and that is a precursor for a recovery,” says Bernard Markstein, senior economist at the National Association of Home Builders.
Despite recent signs of stabilization, the housing market still faces obstacles, says Andres Carbacho-Burgos, economist at Moody’s Economy.com. “The housing recovery is tied to the ongoing recession and job market and depends on the health of the banking system,” he says.
Jessica B. 
