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Last Updated: Monday, 26 June 2006, 16:48 GMT 17:48 UK
US home sales defy rate pressures
New home for sale in Denver, Colorado
Property sales are still robust despite rising mortgage costs
New home sales remain strong in the US, figures show, suggesting that successive interest rate rises have yet to subdue the property market.

Sales rose a faster-than-expected 4.6% in May, although the average price of a new home did fall 4% to $235,300.

Experts believe the impact of months of consecutive rate rises will soon affect the market, with some even forecasting a double-digit fall in sales this year.

The Federal Reserve is expected to raise rates to 5.25% on Thursday.

'Comforting news'

If the Fed does raise rates a further quarter point, it will be the 17th consecutive rise since late 2004.

This strategy of steady monetary tightening has pushed up the cost of borrowing although this has not yet proved a major deterrent to buyers.

There is no sign of precipitous decline in demand
Patrick Fearon, senior economist at AG Edwards and Sons.

Mortgage rates have increased steadily this year to four-year highs, and new home sales as a share of overall property transactions is falling.

However, the market remains fairly resilient with the 4.6% rise following 5.9% and 7.3% increases in the two previous months.

"On the whole, this is a comforting report to those worried about the housing market," said Patrick Fearon, senior economist at AG Edwards and Sons.

"There is no sign of precipitous decline in demand. This is more consistent with a moderation than a steep loss."

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