House sales up in US as buyers find bargains

Sales of homes in the US unexpectedly increased in February as record foreclosures pushed down prices and lured first-time buyers into the market.

Purchases rose 5.1 per cent to an annual rate of 4.72 million from 4.49 million in January, the National Association of Realtors said yesterday in Washington.

The median price slumped 15.5 per cent from a year ago, the second-biggest drop on record, and distressed properties accounted for 45 per cent of all sales.

Stocks, already up after the Obama Administration unveiled details of a plan to buy up to US$1 trillion ($1.7 trillion) in troubled assets, extended the rally after the report.

The President's proposal, combined with last week's Federal Reserve initiative to commit as much as US$1.1 trillion more to unclog credit markets, is raising speculation the global economic slump may soon ease.

The plans "will certainly help, but will take time," said Guy LeBas, chief economist at Janney Montgomery Scott in Philadelphia, who had forecast an increase in sales.

"We're reaching a point where extreme sales declines will not happen, but we haven't seen stability yet. There's a long way to go."

First-time buyers accounted for about half of all sales last month, led by demand for lower-priced properties, said the realtors group's chief economist Lawrence Yun.

- BLOOMBERG