New home sales for July were up in the West, Factory orders were up, jobless claims were down and all is right with the world- at least for the moment. The employment report is encouraging, indicating that employers are not over-reacting to the credit crunch and uncertainty in the financial markets.
South, West Push New Home Sales Out of Hole in July; Not So Much in Northeast, Midwest
Friday , August 24, 2007 Associated Press
Sales of new homes perked up, while factories orders took off in July, raising hopes that the economy can safely make its way through financial turmoil that has shaken Wall Street.
The Commerce Department reported Friday that new-home sales rose 2.8 percent in July, after falling 4 percent in June. The increase in July lifted sales to a seasonally adjusted annual rate of 870,000 units. A second report showed that orders to factories for big-ticket goods jumped 5.9 percent in July, the most in 10 months.
Both reports were better than analysts expected. They were forecasting home sales to fall and were calling for a much smaller, 1 percent gain in factory orders.
In the housing report, the improvement in sales reflected gains in the West and the South, where sales went up by 22.4 percent and 0.6 percent respectively. Sales, however, tumbled 24.3 percent in the Northeast and were down 0.9 percent in the Midwest.
Even with the overall increase in home sales for July, sales are down a deep 10.2 percent from a year ago, underscoring the toll of the housing slump.
The median price of a new home, meanwhile, was $239,500 in July, up from $238,100 in July a year ago. The median price means half sell for more and half sell for less. The average home price, however, dropped to $300,800 in July, down from $311,300 for the same month last year.
Friday’s reports offered a spot of relief amid recent turbulence on Wall Street, which has darkened feelings about the nation’s financial prospects.
Fears that the worsening housing slump and credit crunch could hurt the economy have gripped Wall Street in recent weeks, causing stocks to swing wildly.
"The downside risks to growth have increased appreciably," Fed Chairman Ben Bernanke and his colleagues concluded on Aug. 17. It was a much more sober assessment than they had offered just 10 days earlier when they met to examine economic conditions and interest rates. Against this backdrop, the central bank sliced the rate it charges banks for loans, a narrowly tailored move aimed at propping up sagging financial markets.
If problems persist, the Fed could opt for more aggressive action: reducing an important interest rate, called the federal funds rate, on or before Sept. 18, the Fed’s next regularly scheduled meeting. The Fed hasn’t cut this rate in four years. It is the Fed’s main tool for influencing overall economic activity.
The funds rate, the interest banks charge each other on overnight loans, has stayed at 5.25 percent for more than a year. A cut to the funds rate would bring lower interest rates for millions of people and businesses.