New home sales tumble but upward trend intact

WASHINGTON Wed Jul 25, 2012 4:42pm EDT

A newly constructed home available for sale is pictured in a new housing development area in Vista, California in this file photo taken March 20, 2012. New U.S. home sales recorded their biggest drop in more than a year in June and prices resumed their downward trend, dealing a setback for the budding housing market recovery. Single family home sales tumbled 8.4 percent to a seasonally adjusted 350,000-unit annual rate, the lowest rate in five months, the Commerce Department said on Wednesday. REUTERS/Mike Blake/Files

A newly constructed home available for sale is pictured in a new housing development area in Vista, California in this file photo taken March 20, 2012. New U.S. home sales recorded their biggest drop in more than a year in June and prices resumed their downward trend, dealing a setback for the budding housing market recovery. Single family home sales tumbled 8.4 percent to a seasonally adjusted 350,000-unit annual rate, the lowest rate in five months, the Commerce Department said on Wednesday.

Credit: Reuters/Mike Blake/Files

WASHINGTON (Reuters) - New home sales recorded their biggest drop in more than a year in June and prices resumed their downward trend, dealing a setback for the budding housing market recovery.

Single-family home sales tumbled 8.4 percent to a seasonally adjusted 350,000-unit annual rate, the lowest pace in five months, the Commerce Department said on Wednesday.

The percentage decline was the largest since February 2011 and much of the drop in sales reflected a record 60 percent plunge in the Northeast, which had enjoyed hefty gains since December last year.

"Housing will continue to recover gradually throughout the year but fundamentals are not supportive of a fully fledged housing market recovery," said Yelena Shulyatyeva, an economist at BNP Paribas in New York.

The drop in new home sales last month came on the heels of a decline in home resales during the same period.

Housing had appeared to be bucking the broad weakness in the economy, marked by a sharp slowdown in job growth and a cooling in manufacturing against the backdrop of fears of tighter U.S. fiscal policy in early 2013 and a lingering debt crisis in Europe.

While sales of both new and previously owned homes fell last month, other parts of the housing markets exhibited strength.

New home construction in June hit its highest since October 2008 and confidence among home builders this month touched its best level in more than five years, reports showed last week.

This offers cautious optimism the pullback in sales will be temporary.

"It is hard to believe that the market is turning downward when the home builders' confidence index jumped in July to its highest level in over five years," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

"Either developers are clueless or the data have yet to catch up with reality. I am on the side of the latter."

WEAK DEMAND FOR LOANS

May's sales pace was revised to show 13,000 more units sold than previously reported. New home sales were up 15.1 percent, compared to June last year.

The weak sales and a rare earnings stumble from Apple weighed on the Standard & Poor's 500 index and the Nasdaq composite index.

The S&P 500 index fell for a fourth straight day, but strong results from plane maker Boeing and construction equipment maker Caterpillar lifted the Dow Jones industrial average.

U.S. Treasury debt prices fell marginally but yields held near record lows, while the dollar fell broadly.

An 8.2 percent unemployment rate and stringent lending conditions remain major challenges for the U.S. housing market.

Applications for loans to buy homes fell last week despite record-low mortgage rates, a separate report from the Mortgage Bankers Association showed.

Caterpillar forecast housing starts this year to exceed 750,000 units, a decline from its previous estimate of 800,000.

The median price of a new home fell 3.2 percent from a year earlier after rising strongly in May. The home price decline had appeared to have bottomed, with other measures of home values trending higher in recent months.

The inventory of new homes on the market increased 0.7 percent to 144,000 in June but remained near record lows. At June's sales pace it would take 4.9 months to clear the houses from the market, up from 4.5 months in May.

New home sales last month were dragged down by the record plunge in the Northeast, which puzzled economists.

"There is no obvious explanation for the drop, but one possibility consistent with patterns in other data is that the unusually early spring boosted sales earlier and as a result the usual spring sales pop has fizzled early," said Chris Low, chief economist at FTN Financial in New York.

Sales in the South fell 8.6 percent. In the West, sales rose 2.1 percent and were up 14.6 percent in the Midwest.

(Editing by James Dalgleish)

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Comments (10)
bobber1956 wrote:
What the….
From Reuters 7-18
“WASHINGTON (Reuters) — Builders began work on the most new homes in June in well over three years, providing some support to an economy that has shown worrisome signs of cooling”.
http://www.nytimes.com/2012/07/19/business/economy/us-housing-starts-near-a-four-year-high.html

And now: “home sales in June fell by the most in more than a year and prices resumed their downward trend”

Sell less build more? And all the repos? Did I miss something or did the housing “market” just create the worst worldwide finacial ever? Nothing learned.

Jul 25, 2012 10:42am EDT  --  Report as abuse
breezinthru wrote:
There will be no housing recovery while 11 million homeowners continue with deeply underwater mortgages. Though those homeowners have been continuing to make timely payments on their properties, the principal part of the monthly payment evaporates each month. As time marches on, life happens and they will eventually find (for one reason or another) that they MUST move… and they will not be able to even break even by selling. They will have no choice but to default.

Unless a way is found to refinance those mortgages at fair market value there will be a steady flow of defaults for years to come.

Jul 25, 2012 10:48am EDT  --  Report as abuse
SanPa wrote:
One day after Zillow’s pronouncement of an end to the housing depression. Perhaps, the way to address the problem is the invoke Kelo v. City of New London, declare that new home building is negatively impacting economic activity within communities, and call for a complete home-building shutdown.

Jul 25, 2012 10:50am EDT  --  Report as abuse
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