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New-home sales hit record in June

Sales of new U.S. homes jumped 4.0 percent in June, exceeding expectations and striking a record high as median sales prices declined for the second month in a row, a government report showed on Wednesday.
/ Source: Reuters

Sales of new U.S. homes jumped 4.0 percent in June, exceeding expectations and striking a record high as purchases climbed across the United States, a government report showed on Wednesday.

The Commerce Department said new single-family home sales last month rose to a seasonally adjusted annual rate of 1.374 million units from an upwardly revised 1.321 million unit rate in May.

The June sales pace was 14 percent higher than a year ago. May sales were first reported at a 1.298 million unit rate.

Wall Street had expected June new home sales to rise to a 1.300 million unit pace.

Sales climbed throughout the United States, the data showed. Sales rose 7.2 percent in the U.S. Northeast, 5.1 percent in the South, 2.8 percent in the West and 2.1 percent in the Midwest.

Compared with the same month a year ago, the increases were more dramatic, especially in the Midwest, which saw new home sales climb 24.2 percent from June 2004.

The supply of homes increased to a record 454,000, up 2.5 percent from May and 18.5 percent higher than a year ago.

But with sales running at record pace, June’s inventory of homes available for sale represented four months’ worth, the lowest level since October 2004 when homes available for sale represented 3.8 months’ worth of inventory.

“This is very consistent with our application data,” said Doug Duncan, chief economist at the Mortgage Bankers Association. “It’s been saying that applications for home purchases have been running very near record levels and this is actually a record level so I’m not surprised.

“Interest rates are still very good. There’s lots of demand out there,” he said.

Lower prices
Sales of both new and previously owned homes have remained robust for more than four years due to stubbornly low mortgage rates. Earlier this week, data showed sales of existing homes hit a record pace in June, due in large part to borrowing costs that remain lower than a year ago.

But while the sales pace remains torrid, prices on new homes have begun to decline, the Commerce Department report showed.

The national median sales price of a new home fell for the second month in a row, down 5.5 percent in June to $214,800 from $227,400 in May. The average sales price on a new home fell to $267,400 in June from $287,400 the previous month.

But economists and analysts said that was due to the big jump in new home sales in cheaper areas, such as Midwest and South. Those regions remain far less expensive than the coastal areas that some economists have started to worry about.

“This was likely driven by a higher proportion of sales in the Midwest, where average selling prices tend to be lower, and a shift to higher density housing,” Banc of America Securities analyst Daniel Oppenheim wrote in a research note.

Without those factors, single-family home prices continued to rise, he said.

Still, shares of U.S. homebuilders fell.

The Dow Jones U.S. homebuilders index was off 0.18 percent. The index fell by more than 1 percent in the 30 minutes following the Commerce Department report’s release, but had retraced most of the loss by early afternoon.

UBS Securities LLC noted in a research note that median new home prices are “an extremely volatile data series,” adding that median sales price data for existing homes, which in June rose 14.7 percent from a year ago, were less volatile.

Existing homes also offer a more reliable metric because they represent about 80 percent of the housing market, according to the National Association of Realtors.