Sales of new U.S. single-family homes fell to an eight-month low in June and data for the prior month was revised sharply down, the latest indications that the housing market was slowing down.
The Commerce Department said on Wednesday new home sales decreased 5.3 percent to a seasonally adjusted annual rate of 631,000 units last month, the lowest level since October 2017. May’s sales pace was revised down to 666,000 units from the previously reported 689,000 units.
Economists polled by Reuters had forecast new home sales, which account for about 10 percent of housing market sales, falling 2.8 percent to a pace of 670,000 units in June.
New home sales are drawn from permits and tend to be volatile on a month-to-month basis. They increased 2.4 percent from a year ago. Housing market data has weakened in recent months, with homebuilding falling to a nine-month low in June and home resales declining for a third straight month. Building permits also dropped to a nine-month low in June.
The sector has been plagued by rising building material costs and shortages of land and labor, which have put a squeeze on the supply of houses available for sale and kept house prices elevated.
Though the moderation in housing is largely driven by supply constraints, there are concerns that persistent weakness will eventually spill over to the broader economy. The housing market has underperformed the economy so far this year.
According to a Reuters survey of economists, the economy likely grew at a 4.1 percent annualized rate in the second quarter, which would be double the 2.0 percent pace set in the January- March period.
Economists are forecasting little or no contribution from housing to gross domestic product in the second quarter.
Residential investment subtracted from GDP growth in the first quarter. The government will publish its snapshot of second-quarter GDP on Friday.
U.S. financial markets were little moved by the new home sales data.
New home sales in the South, which accounts for the bulk of transactions, declined 7.7 percent in June. Sales fell 5.2 percent in the West and tumbled 13.4 percent in the Midwest. They surged 36.8 percent in the Northeast to their highest level since December 2007.
The median new house price fell 4.2 percent to $302,100 in June from a year ago. There were 301,000 new homes on the market in June, the most since March 2009 and up 1.7 percent from May. Supply is just over half of what it was at the peak of the housing market boom in 2006.
A survey last week showed confidence among single-family homebuilders steady in July, with builders saying “they continue to be burdened by rising construction material costs.” The Trump administration in April 2017 imposed anti-subsidy duties on imports of Canadian softwood lumber, which builders say have significantly raised the cost of a new home.
At June’s sales pace it would take 5.7 months to clear the supply of houses on the market, the most in 10 months and up from 5.3 months in May. Nearly two-thirds of the houses sold last month were either under construction or yet to be built.
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