Sales of new U.S. homes dropped unexpectedly in September right as the government tax credit for first-time home owners is about to expire, the Commerce Department said on Wednesday. The Commerce Department said that sales fell 3.6 percent to a seasonally adjusted annual rate of 402,000 from a downwardly revised 417,000 in August. Economists surveyed by Thomson Reuters had expected a pace of 440,000. It was the first decline since March. Sales in September were down 7.8 percent from the same time in 2008. The average sales price of $204,800 was off 9.1 percent from $225,200 a year earlier, but up 2.5 percent from August's level of $199,900. The drop in sales was driven by a nearly 11 percent decline in the West and a 10 percent drop in the South. Sales rose 35 percent in the Midwest and were unchanged in the Northeast. The data reflects contracts to buy homes, not completed sales. Many new homes are sold while they are still under construction, and buyers may be worried that they would not be able to complete the deal before the November 30 deadline to take advantage of a tax credit of up to $8,000 for first-time buyers. Congress is considering extending the tax credit through March 31 and gradually phasing it out over the rest of next year. There were 251,000 new homes for sale at the end of September, down 3.8 percent from August and the lowest inventory in nearly 17 years. At the current sales pace, that represents 7.5 months of supply. --SPA
