Unexpected rise in US home sales

The US housing market is weaker than last year

Sales of new US homes unexpectedly recovered in August, rising 4.1% from July, official figures show.

The annual rate of new home sales totalled 1.050 million last month, compared to 1.009 million in July, the Commerce Department reported.

The August rise followed a 7.5% fall in sales in July, but was still down 17.4% from the same month in 2005.

The average price of a new home was $237,000 (£126,000), down from $240,100 a year earlier.

"The story is that the housing market is still on a downward trend," said economist Patrick Fearon of AG Edwards & Sons.

Rate cuts?

The latest housing figures came after separate official data indicated that new orders for US-made durable goods fell unexpectedly in August.

It was the second monthly decline in a row, and the first time since April-May 2004 that orders for durable goods - items meant to last three years or longer - fell in consecutive months.

Despite US consumer sentiment continuing to hold up - a survey showed that it rose strongly in September - the ongoing downturn in the housing market is likely to concern investors.

Analyst Matthew Smith, of Smith Affiliated Capital, said he now expected action from the Federal Reserve.

"The stock market believes with real estate coming down, the Fed may go on hold through October and may begin cutting rates next year, because of economic data that has been coming down rather fast," he said.