U.S. purchases of new homes unexpectedly dipped to the weakest pace in nine months as higher prices and mortgage rates sideline demand, adding to signs of a cooling in the housing market, government data showed Thursday.
Highlights of New-Home Sales (July)
Single-family home sales fell 1.7% m/m to 627k annualized pace (est. 645k) after 638k rate (revised from 631k) Median sales price increased 1.8% y/y to US$328,700 Supply of homes at current sales rate rose to 5.9 months from 5.7 months; 309k homes for sale was highest since 2009
The first back-to-back decline since January was led by a 52.3 per cent drop in the Northeast to 21,000 home sales, the fewest since 2015, as well as a 3.3 per cent decline to 355,000 in the South, the biggest region. The West and Midwest recorded gains.
The figures follow data Wednesday showing sales of previously- owned homes fell for a fourth month to the lowest since early 2016. A separate report on Thursday showed home prices rose 1.1 per cent in the second quarter from the previous three months, the smallest gain in four years, according to the Federal Housing Finance Agency.
The S&P Supercomposite Homebuilding Index fell as much as 1.6 per cent as of 11 a.m. in New York, with all 15 index members declining. The gauge has retreated 16 per cent this year as the broader S&P 500 reached an intraday record this week.
At the same time, a robust job market and higher take-home pay following tax cuts should keep demand for new homes stable. The number of properties sold but not yet under construction rose to 212,000, the highest since November, a sign builders will stay busy in coming months. In addition, 65,000 homes were for sale but not yet started, the most since 2008.
New-home sales, tabulated when contracts get signed, account for about 10 per cent of the market. While volatile, they’re considered a timelier barometer than purchases of previously owned homes, which are calculated when contracts close and are reported by the National Association of Realtors.
What Our Economists Say
Today’s housing results could escalate Fed concerns about the sector, which were highlighted in the minutes from the July 31-Aug. 1 FOMC meeting. Housing popped up for the first time in a while as a potential downside risk. Peak home-buying season for the year is well behind us. While purchases typically fall in July, this year’s decline was steeper than average.-- Yelena Shulyatyeva and Carl Riccadonna, Bloomberg Economics Read more for the full reaction note.
Commerce Department said there was 90 per cent confidence that the change in sales last month ranged from a 16.4 per cent drop to a 13 per cent increase, underscoring the volatility of the data Report is released jointly by the Census Bureau and Department of Housing and Urban Development in Washington