Home Sales Surge in Us As Builders Cut Prices

Sales of new homes in the United States jumped by their largest amount since 1993 last month - but only because housebuilders cut their prices at the fastest rate in nearly four decades.

In a sign that construction companies will do whatever it takes to shift empty houses, and that Americans respond to a bargain, prices were cut by 10.9% last month compared with a year earlier, the biggest fall since 1970.

The result was a 16.2% jump in sales from March to April - the strongest surge in 14 years, shifting 981,000 homes. Analysts had expected an almost unchanged figure. At the same time, the average price of a new home fell $28,500 (£14,000) to $229,100, according to figures from the US commerce department yesterday.

There were 538,000 new homes for sale in April, down from 546,000 in March. It would take 6.5 months to clear that inventory at the current sales pace, less than the 8.1 months recorded in March.

Dimitry Fleming, an ING Financial Markets analyst in London, said: "This piece of data combined with home completions at the lowest level in six years suggests the supply overhang is finally starting to head south.

"However, with supply still high, price concessions need to be made. Profits are likely to erode further in the next few quarters," he said.

The cooling housing market is a key factor behind the recent slowdown in the US economy. Some analysts expect the Federal Reserve to start cutting interest rates soon from their current 5.25%.