Sales of new homes increase 2.8% in July

Sales of new single-family U.S. homes unexpectedly rose in July and orders for durable goods posted strong gains that underlined the economy’s strength just before a credit crisis socked financial markets.

New-home sales rose 2.8% to an 870,000 annual pace last month, reversing two months of declines, and inventories eased, a Commerce Department report showed Friday.

Analysts were expecting new home sales to dip to an 820,000 annual sales pace.

Home sales in June were revised to an annual rate of 846,000 from the previously reported 834,000 rate.

“It’s unexpectedly firm. So combined with durable goods data, this suggests that the economy was fairly sturdy heading into the market disruption in August,” said Pierre Ellis, senior global economist at research firm Decision Economics Inc. in New York.

An earlier Commerce Department report showed that new orders for long-lasting U.S.-made manufactured goods surged a much bigger-than-expected 5.9% in July, the biggest gain since September, and a business investment gauge posted the first gain in three months.

Analysts were expecting orders of durable goods, which are meant to last three years or longer, to rise 1%. Nondefense capital goods orders excluding aircraft, viewed as an indicator of business spending, gained 2.2%, the steepest climb since March.

“It doesn’t reflect the impact of the recent financial crisis,” Hugh Johnson, chief investment officer at asset management firm Johnson Illington Advisors in Albany, N.Y., said of the durable goods report.

Excluding volatile transportation orders, durable goods orders jumped 3.7% in July, the sharpest rise since August 2005 and the first rise in that category since April.

When defense orders were stripped out, durable goods orders advanced 4.9%, the strongest increase since March.

Transportation equipment orders rose 10.8%. Civilian and defense aircraft orders advanced by 12.6% and 15.8%, respectively, while orders for cars, trucks and parts advanced 9.8%.

Orders for computers and electronic products and machinery posted their sharpest gains since November 2006.

The supply of homes available for sale eased to a seasonally adjusted 533,000, the lowest since January 2006, the Commerce Department said. That represents a 7.5-month supply of homes available at the current sales pace.

The supply of new homes available for sale is down 7% from July 2006, the biggest 12-month drop since January 1998.

The median sales price rose to $239,500 in July from $230,600 in June. That was down 3.4% from the same month a year earlier, the biggest 12-month decline since October 2001.