U.S. new home sales fall sharply; house prices rise

A newly constructed home is pictured before being occupied by its buyers in a new housing development area in Vista, California March 20, 2012. REUTERS/Mike Blake

(Reuters) – Sales of new single-family homes in the United States fell sharply in July to their lowest level in nine months, casting a shadow over the country’s housing recovery.

Sales dropped 13.4 percent to an annual rate of 394,000 units, the Commerce Department said on Friday.

The reading, which was well below economists’ expectations, could be a sign that a recent surge in mortgage rates is weighing on the economy, although the data is often subject to large revisions.

The report could weaken the case for the U.S. Federal Reserve to reduce its support for the economy by trimming monthly bond purchases later this year.

“The higher mortgage rates are having an impact on the housing market,” said Scott Brown, chief economist with Raymond James in St. Petersburg, Florida. “That makes tapering (bond purchases) somewhat less likely.”

The government revised sharply lower its estimate for new home sales in May and June.

Yields on U.S. government debt dropped sharply and the dollar weakened following the release of the data, a sign that some investors were scaling back bets that the Fed would trim its $85 billion in monthly bond purchases next month.

Mortgage rates have risen sharply since May on bets that the Fed would soon begin tapering its bond purchases. The stimulus program is designed to lower interest rates to make it easier for businesses to expand and take on new workers.

The housing market, which has been a major drag on the U.S. economy since the 2007-09 recession, appeared to turn a corner early last year when home prices began to rise.

Last month, the median price for a new home sale rose to $257,200, up from $237,400 in the same month of 2012.

There have been indications that higher borrowing costs are having only a limited impact on the overall housing market.

Sales of existing homes, a much larger category than new homes, surged to a three-year high last month. Some analysts speculated, however, that home buyers rushed into the market to lock in mortgage rates before they rose further.

(Reporting by Jason Lange; Additional reporting by Richard Leong in New York; Editing by Paul Simao)

John Marcotte

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NAHB Says: New Home Sales Readjust

NAHB Says: New Home Sales Readjust

New home sales were down 4.6 percent in February from January but up 12.3 percent from a year ago. The drop in February was from an elevated January that was the highest since mid-2008. The inventory of unsold new homes remains very low by historic standards at 4.4 month’s supply.

Regionally, the Midwest was the only region with an increase, up 14 percent to an annual rate of 58,000. The Northeast was down 13 percent in a month with significant snow fall. The South was down 10 percent from January and down 6 percent from a year ago. The region did have more rainfall than usual during February and the 2013 average so far remains above the first three quarter averages in 2012. The West fell 2 percent but remains at levels last seen since early 2008.

Median sales prices rose 3 percent from last year because more of the homes sold were in the $400,000 plus bracket rather than inflation in individual home prices. Additional house price increases are expected as building costs rise. Building material prices, especially critical components such as lumber and wood sheets, have risen significantly in the past year, labor costs are beginning to rise as builders try to attract lost workers back to the industry and lot prices are starting to rise as the inventory from the past boom is finally absorb but no new development has taken place.

The February sales pace of 411,000 is in line with expectations for the year. NAHB expects new home sales to average 449,000 for 2013 as more consumers regain the confidence to purchase a home. At that rate, the home building industry remains at less than two-thirds of what would be considered a normal market.

View this original post on the NAHB blog, Eye on Housing

Boulder homes sales continue to be on the rise!

John Marcotte

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