New home sales edged down 0.8 percent in June after soaring to a record sales pace in May, the government reported Tuesday.
The Commerce Department said the June decline pushed sales of new single-family homes down to an annual rate of 1.33 million units, still the second-highest level on record, following the all-time high sales pace of 1.34 million set in May.
The decline was smaller than the one analysts had been predicting and indicated that the housing sector, one of the star performers of this recovery, still has a tremendous amount of momentum even though mortgage rates are now about 1 percentage point higher than they were a year ago.
Economists said they expect both new home sales and existing home sales to set all-time records for the year, although they are predicting the sales pace will slow in the second half of this year. On Monday, the National Association of Realtors reported that sales of existing homes surged to an all time high of 6.95 million units in June, the fifth consecutive monthly gain.
Sales of new homes have demonstrated more of a sawtooth pattern. The 0.8 percent drop in June followed an 11.7 percent surge in sales in May which in turn had followed a 5.7 percent drop in April sales.
Regionally, the South was the only area of the country to show strength in June with sales climbing 9.6 percent from the May level to an annual rate of 696,000 units, a new record for that part of the country. Sales fell in all other regions.
The median sales price for a new home rose to $209,900 in June, up from a median price of $206,300 in May.
Sales fell the most in the Northeast, dropping by 14.2 percent to an annual rate of 91,000 units. Sales were down 13.1 percent in the West to an annual rate of 338,000 units and slipped by 2.9 percent in the Midwest to an annual rate of 201,000 units.
Analysts said the strength seen in the June surge in sales of existing home sales and the high levels of new home sales in both May and June probably reflected a rush by home buyers to close deals before mortgage rates go higher.
Rates on 30-year mortgages have actually retreated a bit in the past five weeks, falling to 5.98 percent last week according to Freddie Mac's nationwide survey, the first time this rate had been below 6 percent in three months.
But analysts predict that rates will resume their upward climb in coming weeks as the Federal Reserve prepares to keep ratcheting upward a key interest rate it controls in an effort to make sure that inflation remains under control.