New-home sales fell unexpectedly in July for the second month as the housing recovery makes only fitful progress.
Sales declined 2.4 percent to a 412,000 annualized pace, the fewest since March and weaker than the lowest estimate of economists surveyed by Bloomberg, after a 422,000 rate in June, the U.S. Commerce Department reported today in Washington.
Housing has advanced in fits and starts this year, buffeted by tight credit and slow wage growth. A shortage of skilled labor and supply-chain bottlenecks also have hindered construction even as population growth boosts demand for shelter. Bigger gains in employment and wages would stoke a more-rapid recovery.
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“The level of activity is so much lower than what I and many others expected it to be at this point,” Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama, said before the report. “It’s recovering, it’s just not recovering at the rate we expected it to heading into this year. When we do finally start seeing better earnings growth, that’ll support a better pace of home sales.”
The median forecast of 70 economists surveyed by Bloomberg called for the pace to accelerate to 430,000. Estimates ranged from 414,000 to 470,000. June’s pace was revised up from a previously reported 406,000.
The median sales price of a new house climbed 2.9 percent from July 2013 to $269,800, today’s Commerce Department report showed.
Purchases dropped in three four U.S. regions, led by a 30.8 percent slump in the Northeast. The West declined 15.2 percent and the Midwest fell 8.8 percent. Sales climbed 8.1 percent in the South.
The supply of homes at the current sales rate rose to 6 months, the highest since October 2011, from 5.6 months in June. There were 205,000 new houses on the market at the end of July, the most in almost four years.
New-home sales, which last year accounted for about 5 percent of the residential market, are tabulated when contracts are signed, making them a timelier barometer than transactions on existing homes.
Existing-home sales picked up last month as low borrowing costs and an increase in inventory drew buyers. The annual pace of purchases climbed to 5.15 million in July, the best showing since September, according to the National Association of Realtors. Residential construction also rebounded, with starts climbing 15.7 percent last month to a 1.09 million annualized rate, the Commerce Department reported last week.
Builders and their suppliers see room for growth as the job market improves. As foreclosures and other distressed property sales become a smaller share of the market, housing growth will accelerate, said Robert A. Niblock, chairman and chief executive officer of home-improvement chain Lowe’s Cos., based in Mooresville, North Carolina.
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“Signals from the housing market appear mixed,” Niblock said on an Aug. 20 earnings call. “We believe home-improvement spending will continue to progress in tandem with strengthening job and income growth.”
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