Oct. 25 (Bloomberg) -- Sales of new U.S. homes unexpectedly rose in September after figures for previous months were revised down, maintaining concern the housing slump will restrain economic growth.

Purchases increased 4.8 percent to an annual rate of 770,000 that matched the median forecast of economists surveyed by Bloomberg News. August purchases were revised down to an 11-year low of 735,000, the Commerce Department said today in Washington.

Residential sales will remain weak as credit restrictions and higher mortgage rates limit the number of eligible buyers. Reduced demand is hurting purchases of housing-related products, such as furniture and appliances, and threatens to affect other areas of spending.

``The profile of sales over the past few months looks a good deal weaker than originally thought,'' said Ian Shepherdson, chief U.S. economist at High Frequency Economics LLC in Valhalla, New York. ``Sales have further to fall.''

After the report, the benchmark 10-year U.S. Treasury note yielded 4.36 percent, up 2 basis points from yesterday. Stocks were higher.

The median estimate was based on a survey of 77 economists by Bloomberg News. The Commerce Department previously reported August sales at a 795,000 pace. Prior estimates for purchases in June and July were also lowered.

Median Price

The median price rose 5 percent from September 2006 to $238,000.

The number of homes for sale at the end of September fell 1.5 percent to 523,000, the fewest since January 2006. At the current sales pace, that brings the inventory of unsold homes down to 8.3 months.

``Looking at the listings of new homes suggests that the inventory is still way too high and that we'll see even greater discounting in order to clear the market,'' Avery Shenfeld, senior economist at CIBC World Markets in Toronto, said before the report.

Other reports have shown steep declines in prices. The S&P/Case-Shiller price index for 20 U.S. metropolitan areas fell 3.9 percent in July from a year earlier. The Commerce Department's measure for new home sales prices can be influenced by changes in the types of homes sold.

Builders are offering more incentives to attract buyers. Pulte Homes Inc., the third-largest U.S. homebuilder, had a Halloween-themed ``Monster Sale'' last weekend including free appliances and landscaping and 5.875 percent, 30-year fixed financing.

Factory Orders

Earlier today, the Commerce Department said orders of durable goods unexpectedly fell in September, restrained by a slump in demand for military equipment that overshadowed increases in business investment. More orders for capital equipment, a sign of business spending, may ease concern the housing slump will lead to a broader economic slowdown and end the expansion.

The government will release its advance estimate of third- quarter economic growth on Oct. 31, the same day Fed policy makers vote on the benchmark overnight lending rate between banks. The Fed last month lowered the interest rate for the first time in four years.

Residential investment has subtracted from economic growth every quarter since the first quarter of 2006. The economy will expand this year at a 2 percent annual rate, the least since 2002, according to the median estimate of economists surveyed by Bloomberg News earlier this month.

Bets on Rate Cut

Traders yesterday added to bets that the Fed will cut interest rates again next week, after the National Association reported weaker-than-forecast existing home sales. Futures on the Chicago Board of Trade showed there was a 100-percent chance the Fed will reduce its benchmark rate by a quarter-point, up from 88 percent the day before and 54 percent a week earlier.

Sales of previously-owned homes dropped 8 percent in September to 5.04 million, the lowest level since record-keeping began in 1999, the National Association of Realtors said yesterday. The inventory of homes for sale rose to a 10.5 months supply, also the highest on record.

Existing homes account for about 85 percent of the market and new homes make up the rest. New homes are considered to be a more current measure though because they are calculated based on contract signings rather than closings.

Fed Chairman Ben S. Bernanke last week said the drop in residential construction will be a ``significant drag'' on growth into 2008, though evidence of a broader impact on spending is limited. He reiterated that policy makers will ``act as needed'' to secure growth and contain prices.

New home sales rose in two of four regions led by a 38 percent jump in the West.

Credit Restraints

Stricter lending standards and higher borrowing costs are making it more difficult to qualify for loans. The Mortgage Bankers Association forecast last week that mortgage lending will tumble this year to $2.3 trillion, the lowest since 2000, as the ``credit shock'' restricts lending.

Foreclosures doubled in September from a year earlier as subprime borrowers struggled to make payments on adjustable-rate mortgages, RealtyTrac Inc. said Oct. 11.

D.R. Horton Inc., the second-largest U.S. homebuilder, said Oct. 16 that orders in the fiscal fourth quarter plunged to the lowest in almost six years as customers backed out of purchases and banks restricted lending.

Chairman Donald Horton said in a statement that prospective buyers had more difficulty obtaining mortgages, hurting demand. ``Buyers continued to approach the home-buying decision cautiously,'' Horton said. ``We expect the housing environment to remain challenging.''

To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net

Last Updated: October 25, 2007 10:25 EDT