Supply of New Homes Sinks to a 4-Year Low

Brisk new-home sales in June pulled the supply of houses on the market to a four-year low, the Commerce Department said Wednesday, as an expanding economy braced consumer demand.

Sales increased 6.1% in June to a seasonally adjusted annual rate of 819,000 units after a steeply revised 1% rise to 772,000 in May.

Previously, the department said May sales had jumped 7.1% to a much higher rate of 825,000. Commerce also revised sales downward for March and April from levels that it had estimated earlier.

Analysts said widespread revisions, especially the big downward change in May sales, complicated interpretation of the monthly figures. But they said the positive trend on a year-over-year basis combined with slim inventories increased chances that sales could set a new record this year.

“We are on target to shatter the record for home sales of 757,000 units set last year,” said Joel Naroff, an economist for First Union Corp. of Charlotte, N.C.

Naroff said rising incomes, high levels of consumer confidence and a soaring stock market have bolstered homeowners’ buying power.

As bond yields continued to fall Wednesday--dipping to 6.32% from Tuesday’s 6.38%--the Dow Jones industrial stocks average closed up 80.36 points to 8,254.89, plowing past 8,200 just two weeks after its first close above 8,000. It was the sixth new high in the last seven sessions.

Michael Carliner, an economist with the National Assn. of Home Builders, said sales for the full year should hit 800,000. The monthly selling pace is likely to ease in the second half, he added, but at a lofty enough level to ensure a record for full-year sales. June sales were running 11.9% above the level a year earlier, when new homes were selling at a rate of 732,000 a year.

Sales in the West increased 12.4% to 226,000 in June after a 5.2% decline in May. Midwest sales were up 7% to 153,000 after a 9.2% increase in May, and in the South sales were up 9.2% following a 1.2% gain in May. Sales in the Northeast fell 21.1% to 71,000 after a 3.4% increase in May.

The supply of new homes on the market--282,000--was the lowest since July 1993.

At June’s sales pace, there was only a 4.2-month supply of new homes on the market, the lowest in 26 years.

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New-Home Sales

Seasonally adjusted annual rate, in thousands of units:

June: 819

Source: Commerce Department