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New home sales in the USA rose last month at the fastest rate since 2005, the US Commerce Department said yesterday in a report, highlighting the case that the hammered US residential real estate market is staging a recovery. Separately, official figures showed that new orders for durable goods tallied up their biggest jump in 2 years in July, as aircraft purchases soared and the US Cash-for-Clunkers program fueled a big rise in demand for automobiles. Sales of new homes jumped by 9.6% to an adjusted annual rate of 433,000 in July. The 4th consecutive monthly rise beat even the most bullish forecasts of Wall Street analysts and exceeded the revised June jump of 9.1%. New home sales are still off by 13.4% compared with the same month a year ago. Buyers are responding to low prices and the popular 1st time home buyer tax credit which has succeeded in luring people back to the market. The median price of a new home slipped a bit to US$210,100 in July and is off by 11.5% year-on-year.

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The data is announcing that the institutional side lined money, i.e. Pension managers and Mutual Fund houses have been among the biggest buyers of the DJIA in recent weeks, confirming the growing belief the recession is over. Between July 14 and July 21, when the DJIA gained almost 600 pts to close at 8915, net buying by pension managers and mutual fund managers, the so-called “long-term” or “big” money managers, totaled US$1.9B, according to Thomson Reuters, who analyzed settlement records of the Dow components.The following week, when the DJIA approached 9000, Pensions and Mutual Funds were net sellers but only at US$578M, while hedge funds were net buyers of US$19M in Dow stocks but not after selling US$166M the previous week, the settlement records showed. “There is some momentum lost among pensions and mutual fund investors, but the move is still generally positive,” Shacket said on Tuesday. “These buyers are saying that this market is going to go higher, and not lower any time soon.” The move by these institutional investors into Dow stocks corroborates with economic data and earnings that have been better than expected.

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