WASHINGTON -- Sales of new U.S. homes fell 12.8% in July, but the drop came after revisions to June sales showed the sales' highest growth in 12 years.
The Commerce Department said on Friday that new homes sold at a seasonally adjusted annual rate of 635,000 units. That's down from an upwardly revised rate of 728,000 in June. So far this year, sales have risen 4.1%, a sign that buyers are beginning to respond to lower mortgage rates.
The volatility in home sales reflects broader uncertainty in the housing market. Buyers have been eager to take advantage of wage growth and historically low mortgage rates. The average rate on a 30-year loan declined to 3.55% this week, according to mortgage buyer Freddie Mac -- the Federal Home Loan Mortgage Corp.
The revisions to the June figure, coupled with a rebound in existing-home sales in July according to data released by the National Association of Realtors, show sales reacting largely well to lower borrowing costs.
However, the rush has further constrained inventories at a time when new construction is limited. Robert Frick, a corporate economist at Navy Federal Credit Union, said that while the revised June figures were a positive sign for the market, low inventory remained the core problem dragging home sales growth.
"The average sales price for a new home was $388,000, and half of home buyers are looking for a sub $300,000 home. Until more, less expensive homes and condos come to market, millions of Americans will be shut out of home ownership," Frick said.
A 50% jump in sales in the Northeast was offset by declines in the West, Midwest and South for July.
The median sales price fell to $312,800. That is down 4.5% from a year ago, but marks the highest level since April.
New-home purchases account for about 10% of the market and are calculated when contracts are signed. They are considered a timelier barometer than purchases of previously owned homes, which are calculated when contracts close.
The average contract rate on a 30-year fixed mortgage has declined to 3.9%, the lowest since late 2016, according to the Mortgage Bankers Association, after the Federal Reserve cut interest rates in July.
The figures follow recent data suggesting positive momentum in the housing market. Existing-home sales, which make up about 90% of transactions, rose to a five-month high in July. The latest housing-starts data showed construction of single-family homes increased to the highest level since January, while building permits also increased.
The supply of homes at the current sales rate increased to 6.4 months from 5.5 months in June. The number of new homes for sale at the end of the month edged up to 337,000 from 333,000.
The number of properties sold for which construction hadn't yet started contracted to 199,000 from 219,000.
Information for this article was contributed by Bani Sapra of The Associated Press; and by Reade Pickert and Jordan Yadoo of Bloomberg News.
Business on 08/24/2019