By Courtney Schlisserman July 27 (Bloomberg) -- Purchases of new homes in the U.S. climbed 11 percent in June, the biggest gain in eight years, adding to evidence the slump that began in 2005 is stabilizing. Sales increased to a 384,000 pace, higher than any forecast of economists surveyed by Bloomberg News and the most since November, figures from the Commerce Department showed to day in Washington. The number of houses on the market dropped to the lowest level in more than a decade. Falling prices and near record-low mortgage rates have started to lure buyers even as the unemployment rate rises. The worst recession in five decades may end in coming months as the downturns in housing and manufacturing ease. ``Things are bottoming,'' Jonathan Basile, an economist at Credit Suisse Holdings Inc. in New York, said before the report. The gain ``continues that notion of stabilization, but it's going to be difficult for builders to be selling at a much more rapid rate until the foreclosure issue subsides.'' Economists forecast new home sales would rise to a 352,000, according to the median of 62 projections in a Bloomberg News survey. Estimates ranged from 335,000 to 377,000. Commerce revised May's reading up to a 346,000 rate from a previously reported 342,000. The median price of a new home decreased 12 percent to $206,200 from $234,300 in June 2008. Last month's value compares with $219,000 in May. Sales of new homes were down 21 percent from June 2008. They reached a record-low 329,000 in January, down 76 from the July 2005 peak. Surge in Midwest The jump in sales in June was led by a 43 percent surge in the Midwest. Purchases increased 29 percent in the Northeast and 23 percent in the West. They dropped 5.3 percent in the South, to the lowest level since January 1991. Builders had 281,000 houses on the market last month, down 4.1 percent from May and the fewest since February 1998. The number of unsold inventory fell a record 36 percent from June 2008. It would take 8.8 months to sell all homes at the current sales pace, the lowest level since October 2007. Other reports underscore the stabilization in housing. The Wells Fargo/National Association of Homebuilders sentiment index has risen in five of the past six months and existing home sales have increased for three months in a row. Even so, foreclosure filings reached a record in the first half of the year, providing competition for homebuilders and pushing down the value of all houses. Also, rising unemployment, which economists forecast will top 10 percent by early 2010, threatens to restrain any recovery in housing. Smaller Losses Standard Pacific Corp., the U.S. homebuilder that gets most of its revenue from California, is among companies seeing a stabilization. It's net loss, the 11th consecutive drop, narrowed to $23.1 million in the second quarter from $249 million a year earlier, the Irvine, California-based company said last week. Revenue fell 29 percent. ``While we still obviously have not achieved the level of profitability that we ultimately need, we are a lot closer than we were a couple of quarters ago and believe that we are in pretty good shape in the short run,'' Chief Executive Officer Ken Campbell said in a July 22 statement. Federal Reserve policy makers have committed to a $1.25 trillion program to purchase securities backed by home loans in an effort to put a floor under the housing market and lower borrowing costs. Those purchases, as well as direct government purchases of Treasuries, drove the rate on 30-year mortgages to a record-low 4.78 percent in April, according to figures from Freddie Mac. Rates have since hovered around 5 percent. Bernanke's View Fed Chairman Bernanke said July 21 that the economy is showing ``tentative signs of stabilization'' and the ``decline in housing activity appears to have moderated.'' Another incentive is the $8,000 tax credit for first-time buyers that is part of the Obama administration's economic stimulus plan. Purchases have to be completed before Dec. 1. NVR Inc., the fourth-largest U.S. homebuilder, said last week that new orders increased 2 percent in the second quarter compared with a year earlier. The rate of cancellations fell to 14 percent from 19 percent in the second quarter of 2008 and 15 percent in the first three months of this year. To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net

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