U.S. new home sales post biggest drop in almost a year
WASHINGTON/NEW YORK (Reuters) - Sales of new U.S. single-family homes fell sharply in June and the prior month's data suffered the biggest downward revision ever, casting a cloud on the housing market recovery and helping to send homebuilder stocks lower.
The Commerce Department said on Thursday sales dropped 8.1 percent, the largest decline since July 2013, to a seasonally adjusted annual rate of 406,000 units. May's sales pace was revised to 442,000 units from a previously reported 504,000 units.
The PHLX housing sector index .HGX fell 2.36 percent, with shares of D.R. Horton Inc (DHI.N), the No. 1 U.S. homebuilder, dropping more than 3 percent. D.R. Horton spooked investors on Thursday when it reported a 23-percent drop in third-quarter profit.
"It’s really been a rental-driven housing recovery because it's really new homebuilders that buy starter houses and sellers can then buy next higher-price houses so it hasn't been a very solidly-based recovery and it’s really stalled out," said Gary Shilling, president of A. Gary Shilling & Co., a New Jersey-based investment research firm.
Economists polled by Reuters had forecast new home sales at a 479,000-unit pace last month. Compared to June of last year, sales were down 11.5 percent.
A run-up in mortgage rates, as well as a shortage of properties for sale, pressured home sales late last year, raising concerns that a weak housing market could undercut economic growth.
New home sales account for only 7.5 percent of the housing market and, although housing overall appears to be on the mend with mortgage rates well off their September peak and job growth gathering momentum, the sector will probably continue to lag the overall economy.
Last month, new home sales fell in all four regions, declining by 20 percent in the Northeast.
The inventory of new houses on the market rose 3.1 percent to 197,000 units, the highest number since October 2010. At June's sales pace it would take 5.8 months to clear the supply of houses on the market, the highest since October 2011.
"I think the rental market is getting well-saturated between vacancies going down and new multi-housing units being built and lots of single-unit houses converted into rentals. I don't see a push in housing going up," Shilling said.
(Reporting by Lucia Mutikani; Editing by Paul Simao)