Lean Inventories Continue to Dampen New Home Sales

July new home sales stumbled again in July, hampered by low inventories and a dearth of homes for under $150,000, HUD and the Census Bureau reported yesterday.

The report said sales of new single-family houses in July came in at a seasonally adjusted annual rate of 571,000, 9.4 percent below the revised June rate of 630,000 and 8.9 percent lower than a year ago (627,000).

Sales fell in three of the four U.S. regions. In the South, sales fell by 4.1 percent to 326,000 units in July, seasonally adjusted, from 340,000 in June and fell by 11.7 percent from a year ago. In the West, sales plunged by 21.3 percent in July to 144,000 units from 183,000 units in June but improved by 1.4 percent from a year ago. In the Northeast, sales dropped by nearly 24 percent to 24,000 units in July from 42,000 units in June and fell by nearly 9 percent from a year ago. Only the Midwest saw improvement, rising by 6.2 percent in July to 69,000 units from 65,000 units in June, although they fell by nearly 13 percent from a year ago.

The report said only 1,000 new homes sold in July for under $150,000. It said 7,000 homes sold between $150,000 and $199,999; 15,000 homes sold between $200,000 and $299,999; 11,000 homes sold for between $300,000 and $399,999; 7,000 homes sold for between $400,000 and $499,999; 6,000 homes sold for between $500,000 and $749,999; and 3,000 homes sold for $750,000 or higher.

The median sales price of new houses sold in July rose to $313,700; the average sales price rose slightly to $371,200. The seasonally adjusted estimate of new houses for sale at the end of July rose by 4,000 to 276,000, representing a supply of 5.8 months at the current sales rate.

Despite the drop, Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said new home sales remain “notoriously volatile” month-to-month and the underlying trend is still improving. “Even drops or gains of this magnitude are well within the norm,” he said.

Vitner noted demand for homes still appears to be improving. “Home builder confidence rose solidly in August and builders generally report strong sales, particularly in the South and West,” he said. “Inventories are rising fastest in the South and West, which account for the overwhelming majority of new home sales.”