New home sales drop to six-month low
Sales of newly built homes fell in July to the lowest level in six months, as the nation’s housing market continues to struggle.
Newly constructed single-family homes sold at a seasonally adjusted annual rate of 298,000, putting the industry on a pace to post the lowest annual sales since the Commerce Department began keeping data in 1963.
The July figures were up 6.8% from a year earlier but were down 0.7% from June.
Although the monthly decline was slight, it sent shares of some major home builders falling and signaled that a housing recovery is far off. Los Angeles builder KB Home ended the day down 16 cents, or 3%, at $5.27, while Bloomfield Hills, Mich.-based PulteGroup Inc. fell 15 cents, or 4%, to $3.61. But Calabasas-based Ryland Group Inc. eked out a gain, rising 6 cents, or less than 1%, to $9.61.
The weakness came on a day that the Dow Jones industrial average surged more than 3%.
“This year is shaping up to be the worst year on record for new home sales,” IHS Global Insight economist Patrick Newport wrote in a note. “The economy is weak, uncertainty is up, as is the likelihood of a recession, and foreclosures and delinquencies remain high.”
The market for new homes has been weak since the collapse of the housing market five years ago. Sales got a boost from special tax credits for first-time buyers through the first half of last year, but fell again once those credits expired. New homes have faced stiff competition from foreclosures, while buyers have been scarce because of tight credit and a poor job market.
The seasonally adjusted estimate of new houses for sale at the end of July was 165,000, representing just over six months worth of inventory at the current sales rate. Economists typically see a six-month supply as healthy. But with sales so weak, it’s a sign that builders are reluctant to build and are keeping inventory low.