US new home sales jump in August, but economists cautious

New home sales in the US jumped unexpectedly in August although economists cautioned that the figures had a track record for being quite volatile, adding that it remained to be seen if the gains were sustainable.

According to the Department of Commerce, sales of new homes shot up at a month-on-month pace of 28.8% to reach an annualised pace of 685,000.

Economists had penciled-in a reading of 500,000.

Sales rose in all geographical regions, pushing the inventory of new homes available for sales down from 10.4 months' worth of sales for July to 8.1 months in August.

The median sales price meanwhile dropped from $466,300 to $436,800 and the average sales price from $556,700 to $521,800.

"The leap in new home sales is either unbelievable - the margin of error in these numbers is massive, +/-18.3% - or unsustainable, if it reflects a rush of purchases by people who locked in rates as they began to surge again," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

"Either way, sales are far above the level implied by the mortgage applications numbers and that can’t last.

"The trend in sales is still downwards, inventory is far too high - the number of new homes for sale is now at the highest since March 2008 - and prices are under pressure."