U.S. New-Home Sales Drop to Eight-Month Low as Prices Fall
(Bloomberg) -- U.S. purchases of new homes fell in June to the slowest pace in eight months, while the median selling price declined to the lowest in more than a year, adding to signs the housing market is cooling, according to government data Wednesday.
Highlights of New Home Sales (June)
Shares of homebuilders including Toll Brothers Inc., Lennar Corp. and KB Home declined after the report, with the SPDR S&P Homebuilders ETF touching the lowest this month. Demand weakened in three of four U.S. regions, including a 7.7 percent drop in the South, the largest area. The decline in sales left 301,000 homes available nationwide in June, the most since March 2009.
The decrease in the median price reflected a bigger share of homes sold in the $200,000 to $300,000 range and a smaller share above that level. That suggests demand remains steady at lower price points amid a strong job market and fairly elevated confidence, while buyers may be reluctant to commit to more expensive properties.
One encouraging sign for the economy was that the number of properties sold in which construction hadn’t yet started rose to a four-month high, a sign builders will stay busy in coming months. A rising pipeline indicates residential construction will continue to boost growth.
New-home sales, tabulated when contracts get signed, account for about 10 percent of the market. 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. Existing home sales fell in June for the third straight month, according to data earlier this week.
“The softer tone in the data for recent months echoes what has been evident in many of the other related housing indicators that we track,” Daniel Silver, an economist at JPMorgan Chase & Co., said in a note.
What Our Economists SayNew home sales fell significantly short of expectations in June. The sharp decline and downward revision to the previous month are the latest signs that rising interest rates slowed overall residential investment in the second quarter. The jump in inventories suggests that weakness in residential investment will persist, and the sector will contribute little to total economic growth in the current quarter.
-- Tim Mahedy and Carl Riccadonna, Bloomberg Economics
Read more for the full reaction note from Bloomberg Economics.