The first back-to-back decline since January was led by a 52.3 percent drop in the Northeast to 21,000 home sales, the fewest since 2015, as well as a 3.3 percent decline to 355,000 in the South, the biggest region. The West and Midwest recorded gains.
The figures follow data Wednesday showing sales of previously- owned homes fell for a fourth month to the lowest since early 2016. A separate report on Thursday showed home prices rose 1.1 percent in the second quarter from the previous three months, the smallest gain in four years, according to the Federal Housing Finance Agency.
The S&P Supercomposite Homebuilding Index fell as much as 1.6 percent as of 11 a.m. in New York, with all 15 index members declining. The gauge has retreated 16 percent this year as the broader S&P 500 reached an intraday record this week.
New Home Sales July Highlights
- Sales of new U.S. single-family homes unexpectedly fell in July to a nine-month low.
- The Commerce Department said on Thursday new home sales decreased 1.7 percent to a seasonally adjusted annual rate of 627,000 units last month.
- Supply of homes at current sales rate rose to 5.9 months from 5.7 months; 309k homes for sale was highest since 2009
- The sector has been plagued by rising building material costs and shortages of land and labor, which have put a squeeze on the supply of houses available for sale and kept house prices elevated.
At the same time, a robust job market and higher take-home pay following tax cuts should keep demand for new homes stable. The number of properties sold but not yet under construction rose to 212,000, the highest since November, a sign builders will stay busy in coming months. In addition, 65,000 homes were for sale but not yet started, the most since 2008.
New-home sales, tabulated when contracts get signed, account for about 10 percent of the market. While volatile, they’re considered a timelier barometer than purchases of previously owned homes, which are calculated when contracts close and are reported by the National Association of Realtors.
Economists polled by Reuters had forecast new home sales, which account for about 10 percent of housing market sales, rising to a pace of 645,000 units in July.
New home sales are drawn from permits and tend to be volatile on a month-to-month basis. They increased 12.8 percent from a year ago. Housing market data has weakened in recent months, with home resales declining in July for a fourth straight month.
The sector has been plagued by rising building material costs and shortages of land and labor, which have put a squeeze on the supply of houses available for sale and kept house prices elevated. Though the moderation in housing is largely driven by supply constraints, there are concerns that persistent weakness will eventually spill over to the broader economy. The housing market has underperformed the economy so far this year.
New home sales in the South, which accounts for the bulk of transactions, declined 3.3 percent in July. Sales rose 10.9 percent in the West and 9.9 percent in the Midwest. They tumbled 52.3 percent in the Northeast to their lowest level since September 2015. The median new house price rose 6.0 percent to $328,700 in July from June. There were 309,000 new homes on the market in July, the most since March 2009 and up 2.0 percent from June.
Existing home sales have also slipped over the past four months, the National Association of Realtors said in a separate report Wednesday. Existing homes — a larger share of the real estate market than new construction — sold at an annual pace of 5.34 million in July, a decline of 0.7 percent from June.
Homebuyers also face higher borrowing costs as the interest charged on a 30-year, fixed-rate mortgage averaged 4.53 percent last week, up from 3.89 percent a year ago, according to mortgage buyer Freddie Mac.