WRAPUP 4-US home sales at 2-yr high, durable goods orders up

* New home sales highest in almost two years

* Supply of new homes on the market lowest since Dec 2005

* Durable goods orders leap on aircraft bookings

* Orders ex-transportation fall, first decline in 3 months
(Adds analyst quote, updates markets)

By Lucia Mutikani

WASHINGTON, May 26 (BestGrowthStock) – New U.S. home sales scaled
their highest level in nearly two years in April, while orders
for long-lasting manufactured goods surged, giving the economy
a firmer foundation to resist possible contagion from Europe’s
debt crisis.

While the data on Wednesday was skewed by a home buyer tax
credit and a more than doubling in aircraft bookings, it showed
the economy’s recovery had underlying strength, analysts said.

“The problems in Europe have a downside risk, but I don’t
think that’s going to push the U.S. economy back into recession
or slow it to such an anemic pace,” said Stuart Hoffman, chief
economist at PNC Financial Services Group in Pittsburgh.

“Conditions are much better to withstand the fallout from
the problems in Europe,” he said, where budget cutbacks risk a
return to recession.

Sales of new U.S. single-family homes jumped 14.8 percent
to a 504,000 unit annual rate last month, the Commerce
Department said. Markets expected a 430,000 unit pace.

The jump in sales reflected buyers signing contracts to
benefit from a popular government tax credit. A pullback is
expected this month. Demand for loans to buy a home has already
dropped sharply and held at a 13-year low last week.

In another report, the department said durable goods orders
increased 2.9 percent last month to their highest level since
September 2008, boosted by a 228 percent surge in bookings for
aircraft. Markets had forecast orders increasing 1.3 percent.

Excluding transportation, however, orders unexpectedly
dropped 1 percent. But March’s gain was revised up to 4.8
percent from 3.5 percent.

Although the report gave a mixed reading on the factory
sector, analysts said upward revisions to a host of categories
in March were a sign of strength in the manufacturing-led
recovery that started in the second half of last year.

They also implied first-quarter growth figures could be
revised higher when the government publishes its second
estimate on gross domestic product on Thursday.


The reports helped markets to shift focus away from
Europe’s debt woes. U.S. stocks (Read more about the stock market today. ) rose, with homebuilder shares
posting hefty gains. U.S. government debt prices fell, while
the dollar rose for a third straight session versus the euro.

Luxury homebuilder Toll Brothers Inc (TOL.N: ) reported a
smaller quarterly loss and said consumer demand was now picking
up. [ID:nN26175992]. Its shares were up nearly 3 percent.

“The data demonstrate that, despite the fiscal meltdown in
Europe, the recovery in the U.S. is still gathering momentum,”
said Paul Ashworth, senior U.S. economist at Capital Economics
in Toronto.

“Increasingly, signs are emerging that private domestic
demand might just be robust enough to survive Europe’s woes,
the removal of the fiscal stimulus and a renewed housing
downturn, without economic growth slowing too drastically.”

Home sales are expected to ebb in the aftermath of the tax
credit before trending higher toward the end of the year.
Buyers had to sign contracts by April 30 and close on the home
by the end of June to qualify for the federal tax credit.

New home sales are measured at contract signing. Sales of
previously owned homes are recorded at contract closing and are
expected to rise through June when the tax credit ends.

Analysts said a strengthening labor market, affordable
house prices and low mortgage rates would support the housing
market, whose collapse was the main trigger of the longest and
deepest recession since the 1930s.

“The market is absolutely starting to recover, but I think
what will happen for the year will be a very steady, slow
increase,” said Mitchell Hochberg, principal at Madden Real
Estate Ventures in New York.

“What you will see at least in May and June is a little bit
of a decline because of accelerated sales in March and April.”

Despite the jump in sales last month, the median sale price
for a new home dropped a record 9.7 percent from March to
$198,400, the lowest since December 2003.

However, the blow from slumping house prices was softened
by a record drop in the supply of homes on the market to the
lowest level since October 1968. Last month’s sales pace left
homes available for sale at 5.0 months supply, the lowest since
December 2005, compared with 6.2 months in March.


Durable goods orders graphic: http://r.reuters.com/duf56k

New home sales graphic: http://r.reuters.com/xyj56k
Investment Basics

(Reporting by Lucia Mutikani; Editing by Kenneth Barry)

WRAPUP 4-US home sales at 2-yr high, durable goods orders up