New home sales fell unexpectedly in July as buyers in the West pulled back sharply.
Sales of recently built single family homes in the U.S. dropped 2.4% from June to a seasonally adjusted annual rate of 412,000, the Commerce Department said Monday. Economists had expected an increase to a 428,000 rate, according to FactSet.
The South was the only region to see an increase, as new home sales climbed 8.1%. In the West, sales tumbled 15.2%.
Holding back sales is a low level of construction, said Jed Kolko, chief economist for real estate website Trulia. Although home building has been on the rise, it remains below historically normal levels.
“The 2014 building boom is in apartments," Kolko tweeted following the report. "[You] can't sell new homes if they're not being built."
The disappointing numbers follow several signs that the housing recovery was strengthening after starting to slow last summer amid higher prices and mortgage rates. Sales of previously owned homes rose for the fourth straight month in July, and builders last month broke ground on new homes at the fastest pace since November.
One encouraging piece of news in Monday’s new home sales report was the Commerce Department revised June's dismal number upward to 422,000 from 406,000.
The new home sales data are based on when contracts are signed, and thus provide a timelier indicator than reports on previously owned home sales, which are recorded when a deal finally closes.
However, given its small sample size, the new home figures are often revised substantially.
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