July New Home Sales Falter

New home sales fell in July, slowed down in part by wet weather in the eastern U.S., HUD and the Census Bureau reported yesterday.

Despite improving new home inventories, sales of new single-family houses in July fell to a seasonally adjusted annual rate of 627,000 in July, down by 1.7 percent from June (638,000) but up by nearly 13 percent from a year ago.

Regionally, declines in the South and Northeast offset gains in the West and Midwest. In the South, sales fell by 3.3 percent in July, seasonally adjusted, to 355,000 units from 367,000 units in June but improved by 17.2 percent from a year ago. In the Northeast, sales fell by half (52.3 percent) in July to 21,000 units from 44,000 units in June and declined by nearly 49 percent from a year ago.

In the West, sales rose by nearly 11 percent to 173,000 units, seasonally adjusted, in July from 303.000 in June and improved by 18.5 percent from a year ago. In the Midwest, sales rose by nearly 10 percent to 78,000 units in July from 71,000 in June and improved by 18.2 percent from a year ago.

HUD/Census reported the median sales price of new houses sold in July rose by 4 percent to $328,700. The average sales price rose by 5 percent to $394,300. The seasonally adjusted estimate of new houses for sale at the end of July rose to 309,000, representing a 5.9-month supply at the current sales rate.

“The parade of disappointing housing data continues,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “An unusually wet summer appears to have depressed new home sales in the Northeast and parts of the South.”

Vitner noted while weather was likely responsible for July’s drop, new home sales “clearly remain on the slow track. Sales in the Northeast are also likely being impacted by new limits on tax deductions for interest and local taxes. Foreign demand has also cooled.”

Earlier this week, the National Association of Realtors reported existing home sales fell for the fourth straight month. Mark Fleming, chief economist with First American Financial Corp., Santa Ana, Calif., said rising interest rates are discouraging existing homeowners from selling their properties. He said home building, as a source of new supply, is crucial to solving the housing supply shortage.

“If existing homeowners remain hesitant to list their homes for sale, then increasing the pace of new home construction is necessary to alleviate the supply shortage that the housing market faces today,” Fleming said.

“Home sales are being stifled by a shortage of homes on the market. The game of musical chairs that is the housing market today needs more chairs,” Fleming added. “Additional supply, particularly of new entry-level homes to meet the needs of the first-time buyers who remain interested in buying even as rates increase, is critical to satisfy the rising demand for housing.”