U.S. New Home Sales Fell 6.8% in June

By Kate Davidson And Kris Hudson 

        WASHINGTON--Sales of newly built single-family homes sank in June, although other recent housing data suggests underlying demand has picked up.
        New-home sales fell 6.8% in June from a month earlier to a seasonally adjusted annual rate of 482,000, the lowest reading since November 2014, the Commerce Department said Friday.
        Economists surveyed by The Wall Street Journal had expected a rate of 550,000.
        The government said sales fell 1.1% in May, down from an initially reported 2.2% increase.
        Most economists shrugged off the latest figures, noting that new-home sales represent only about a 10th of all home purchases and tend to be unreliable from month-to-month. The June figure had a margin for error of plus or minus 12.5 percentage points.
        "I view today's reading for the typically volatile new home sales data as statistical noise, most likely just a hiccup on the path to a healthier housing sector," Amherst Pierpont Securities Chief Economist Stephen Stanley said in a note to clients.
        Still, some said they were baffled by the latest numbers, as many other signs point to building momentum in the housing market, including rising home-builder confidence and a surge of new mortgage applications.
        Sales jumped 28% in the Northeast last month, but fell 17% in the West, 11.1% in the Midwest and 4.1% in the South.
        "The volatility in the stock market last month, triggered by the Greek crisis, might well have persuaded people to hold back temporarily from signing contracts--the point when sales are captured--while waiting for the dust to settle," said Pantheon Macroeconomics Chief Economist Ian Shepherdson. "We have to expect a clear rebound in July, and further gains" in the second half of the year.
        Broader trends suggest the new-home market is gaining momentum along with the broader housing industry. New-home purchases are up 18.1% from a year ago.
        Sales also averaged an annual rate of 512,000 in the first half of the year, compared with an average of 440,000 for all of 2014, said Jim O'Sullivan, chief U.S. economist for High Frequency Economics.
        Stronger job gains, accelerating wages and a pickup in the number of young people forming families and moving into their own homes has helped build momentum in the housing market this spring. Interest rates also remain at historical lows, despite ticking up in recent months.
        A separate report from the National Association of Realtors released Wednesday showed sales of previously owned homes--the bulk of the market--climbed 3.2% in June, hitting their highest pace since February 2007. U.S. construction also soared in June, the Commerce Department said last week, though the increase was driven by demand for apartments rather than single-family homes.
        U.S. home builders also appear more optimistic this month. The National Association of Home Builders' confidence index rose to its highest level since November 2005, to a reading of 60 in July, the group said Thursday. A reading above 50 means most builders generally hold a favorable view of the market for newly built, single-family homes.
        At GL Homes of Florida, a closely held builder based in Sunrise, Fla., sales in June were 38% higher than a year earlier. The builder envisions selling 1,450 to 1,500 homes throughout this year, up from 1,300 in 2014. GL sells homes ranging from the $400,000s to $1.2 million.
        Patty Campbell, GL's division president on Florida's Gulf Coast, cited several reasons for the increase in sales, including harsh recent winters in the north and the likelihood of the Federal Reserve increasing interest rates later this year. "I think some other markets in the country are now doing better, so (prospective buyers) are back from being underwater and to a point that they feel they can sell their house," Ms. Campbell said. "In Florida, we're getting more corporations moving down here."
        Still, the market has plenty of room for improvement. New-home sales, which peaked in July 2005 at an annual pace of 1.4 million, are still far from precrisis levels.
        Friday's report showed the price of a typical home cooled last month. The median price of a new home sold in June stood at $281,800, down 1.8% from a year earlier. The average price also fell 2.8% over the past year, to $328,700.
        The months' supply of new homes--reflecting how long it would take to exhaust all homes on the market at May's sales pace--rose to 5.4 last month from 4.5 in May and 4.6 in April. Shrinking inventories had been putting pressure on prices in recent months.
        "Hopefully, supply constraints will ease going forward, as builders lately seem more willing to aggressively construct new homes than at any time since the bust," Amherst Pierpont Securities' Mr. Stanley said.
        Write to Kate Davidson at kate.davidson@wsj.com and Kris Hudson at kris.hudson@wsj.com
        Corrections & Amplifications
        The median price of a new home sold in June stood at $281,800. An earlier version of this article incorrectly stated it was $281,000. The 6.8% fall in June new-home sales had a margin for error of plus or minus 12.5 percentage points. An earlier version of this article incorrectly stated it was 12.5%. (July 24, 2015)
        (END) Dow Jones Newswires

        July 24, 2015 12:44 ET (16:44 GMT)

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