New-Home Sales Dip 1.6%, Well Below Forecasts

WASHINGTON — Sales of new homes eased during July from a record-setting pace in June, the Commerce Department reported Monday, as the booming housing industry leveled off from a buying spree.

Total new-home sales fell 1.6% to a seasonally adjusted annual rate of 886,000 during July--well under Wall Street analysts’ forecasts for a 918,000-unit sales rate--after a revised 1.1% rise to a record 900,000 in June.

Analysts said some of the monthly drop was related to the strike at General Motors Corp., because the sales falloff was concentrated in the Midwest, but they described the outlook for the industry as still relatively strong.

U.S. home builders and buyers have benefited from a flow of capital from distressed Asian and other overseas economies that have pushed down mortgage rates. During July, U.S. stock markets still were high, reinforcing would-be buyers’ wealth, though stock prices have abruptly tumbled.

The Commerce Department said a month ago that June’s new-home sales had soared to a record 935,000 a year, but it revised that down to 900,000, which was still a record. May sales were at a revised annual rate of 890,000 instead of 901,000, it said.

“The July report shows the housing sector still at a very strong level, but it’s topping out at this rate,” said Lynn Reaser, a Jacksonville, Fla.-based economist for NationsBank Corp. of Charlotte, N.C.

Lending rates for 30-year mortgages averaged 6.95% in July, down from 7% in June. Rates were low by historical standards and especially so because of brisk rises in U.S. job and income growth.

Regionally, new-home sales in the West dipped 0.4% to an annual rate of 236,000.

The sharpest decline in July’s sales occurred in the Midwest, where they plunged 11.7% to 144,000.

Sales fell 1.3% in the Northeast to 74,000 units a year.

Sales in the South, the nation’s largest regional market, rose 1.4% to 432,000.

Reaser said the big drop in Midwest sales suggests that the GM strike, which idled more than 175,000 employees of the No. 1 auto maker and its suppliers for up to eight weeks before a settlement was concluded at the end of July, likely stalled some sales. GM’s headquarters is in Detroit and some of its biggest plants are in the Midwest.

The supply of new homes on the market remained lean, with only four months’ worth finished and ready for sale at July’s sales rate, in comparison with June’s 3.9 months’ supply.

The median price of a new home rose to $147,900 in July from June’s $145,800.

A separate report Monday said Midwestern manufacturing activity unexpectedly contracted in August, suggesting that a decline in exports tied to the Asian financial crisis may slow overall U.S. growth.

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New-Home Sales

Seasonally adjusted annual rate, in thousands of units:

July: 886,000

Source: Commerce Department