Setback for housing market after recent gains in existing home sales and new home construction
Sales of new single-family homes in June dropped 8 percent from the previous month, the U.S. Census Bureau and the Department of Housing and Urban Development announced jointly Wednesday. June sales were at a seasonally adjusted annual rate of 350,000—a five-month low—compared with the revised May rate of 382,000.
The report is being seen as a setback for the housing market. Recent reports have sent mixed signals about its recovery. Existing home prices showed gains in June, but sales declined, according to a report issued last week by the National Association of Realtors. Foreclosures and short sales sold at deep discounts comprised one-quarter of June sales, unchanged from May, but down 30 percent from last year.
A U.S. Commerce Department report also issued last week found that new home construction increased 6.9 percent in June, and 23.6 percent over the year before. The pace of new construction is the fastest the housing market has seen since April 2010, according to National Association of Home Builders, while the National Association of Home Builders announced that confidence among home builders was at a five-year high.
While new home sales dropped following a spike in May, they were 15.1 percent above the June 2011 estimate of 304,000.
The median sales price of new houses sold in June was $232,600, a nearly 2 percent drop from the previous month. The inventory of new homes on the market increased 0.7 percent to 144,000 in June, but remained near record lows. At June's sales pace it would take 4.9 months to clear the houses from the market, up from 4.5 months in May.
Regionally, new home sales last month plummeted 60 percent in the Northeast. They dropped 8.6 percent in the South. They were up 14.6 percent in the Midwest and 2.1 percent in the West.
The Census Bureau defines new home sales as “the signing of a sales contract or the acceptance of a deposit.” Typically about one-quarter of houses are sold at the time of completed construction. The remainder is evenly split between those not yet started and those under construction.
New home sales usually lead existing home sales regarding changes in the residential sales market by a month or two,” according to the Census Bureau website. An existing home sale in January, for example, was probably signed 30 to 45 days earlier, which would have been in November or December based on the usual time it takes to obtain and close a mortgage.
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.