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New Us Home Sales Rise On Rush For Tax Credit

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American housing construction rose 1.5 per cent last month as building companies anticipated a rush of purchases before a federal tax credit for first-time buyers runs out in November.

The US Commerce Department said that construction of new homes hit an annual rate of 598,000 in August, lower than the 600,000 economists had expected but still the highest rate of construction in nine months.

There was a 25.3 per cent jump in starts on multi-family units such as apartment complexes, which offset a 3 per cent fall in single-family homes.

Applications for building permits rose by 2.7 per cent to an annual rate of 579,000, fewer than the 580,000 predicted but seen as a sign that future activity is picking up.

The home construction sector had been among the worst hit by the housing market downturn.

The Government encouraged first-time buyers into the housing market with a tax credit that covers 10 per cent of a property purchase price up to $8,000.

Builders are increasing production now in anticipation of a rush for properties before the tax credits expire at the end of November

Further indications that the economy was recovering came from the Labor Department, which said that new claims for unemployment benefits fell to 545,000 in the week to September 12, down from a revised 557,000 the previous week.

So when the stimulus ends there will be calls for it to continue to boost sales, not that reducing prices by say $15k may help stimulate demand better.

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