Sales of new U.S. single-family homes fell to a seven-month low in June as higher mortgage rates and prices weighed on demand, further evidence that the housing market recovery faltered in the second quarter.
New home sales slipped 0.6% to a seasonally adjusted annual rate of 617,000 units last month, the lowest level since November, the Commerce Department's Census Bureau said on Wednesday. The sales pace for May was revised up to 621,000 units from a previously reported 619,000 units.
Economists polled by Reuters had forecast new home sales, which account for more than 10% of U.S. home sales, rising to a rate of 640,000 units. New home sales are counted at the signing of a contract. They, however, can be volatile on a month-to-month basis. Sales slumped 7.4% on a year-on-year basis in June.
Though the average rate on the popular 30-year fixed-rate mortgage eased from a six-month high of 7.22% in early May, it remained elevated through much of June.
It dropped to a four-month low of 6.77% last week, data from mortgage finance agency Freddie Mac showed, amid hopes that the Federal Reserve will deliver a long-awaited interest rate cut in September. That could help to stimulate sales in the future.
For now, the housing market remains on the back foot. Data from the National Association of Realtors on Tuesday showing existing home sales slumping to a six-month low in June. Single-family housing starts and permits also dropped last month.
The housing market has been hardest hit by the U.S. central bank's aggressive monetary policy tightening to tame inflation. It pulled out of its slump, with residential investment, which includes home building and sales, scoring double-digit growth in the first quarter.
Economists believe that residential investment probably contracted in the April-June quarter.
The government is scheduled to publish its advance second-quarter GDP estimate on Thursday. Growth estimates for the second quarter are around a 2% annualized rate. The economy grew at a 1.4% pace in the first quarter.
New home sales fell 7.7% in the Northeast last month and dropped 6.9% in the Midwest, which is viewed as a more affordable region. They surged 1.4% in the West and gained 0.3% in the densely populated South.
The median new house price dipped 0.1% to $417,300 in June from a year ago. Most of the houses sold last month were below the $499,999 price level.
The inventory of new homes increased in June to 475,000 from 472,000 units in May. At June's sales pace it would take 9.3 months to clear the supply of houses on the market up from 9.1 months in May.
