US housing market in retreat as new-home sales weakest since 1963
Published 26/08/2010 | 05:00
Sales of new homes in the US unexpectedly dropped in July to the lowest level on record, signalling that even with cheaper prices and reduced borrowing costs, the housing market is still retreating.
Purchases fell 12pc from June to an annual pace of 276,000, the weakest since data began in 1963, figures from the US Commerce Department showed yesterday. The median price of $204,000 (€161,180) was the lowest since late 2003.
A lack of jobs is hurting Americans' confidence, leading to a plunge in home demand that threatens to undermine the one-year-old economic recovery. Builders are also competing with mounting foreclosures that are forcing down property values.
"The housing market's recovery has taken a big step back," said Ryan Sweet, a senior economist at Moody's Economy.com in West Chester, Pennsylvania. "The improvement in the labour market is showing signs of fatigue and potential buyers are content to sit on the sidelines, which is understandable considering we have a near-double-digit unemployment rate."
Another Commerce Department report yesterday showed orders for durable goods increased less than forecast in July, a sign one of the few remaining bright spots in the economy is cooling.
Bookings increased 0.3pc, compared with the 3pc median estimate of 75 economists surveyed by 'Bloomberg News'. Excluding transportation equipment, demand unexpectedly dropped.
Economists forecast new home sales would be unchanged at a 330,000 annual pace, according to the median of 74 survey projections. Estimates ranged from 291,000 to 355,000. The government revised down the June figure to 315,000. The median price decreased 4.8pc from July 2009. Purchases fell in all four regions, led by a 25pc drop in the West. The supply of homes at the current sales rate climbed to 9.1 months' worth from 8 months in June. There were 210,000 new houses on the market at the end of July, the same as the prior month. The timing of the tax incentive has caused some wide swings in sales data. New home purchases dropped in May after rising to a more than one-year high the prior month.
Sales of existing homes plunged a record 27pclast month, according to a report yesterday from the National Association of Realtors.
Home resales are tabulated when a contract is closed, while new home sales are counted at the time an agreement is signed, making them a leading indicator of demand.
The homebuyers tax credit required purchases to sign a contract by April 30. The deadline for closing was moved last month from June 30 to September 30. Even so, there was a rush to close ahead of the initial expiration date.
"Our gross contract numbers were not impressive," Chairman Robert Toll said in a statement. "The acceleration we saw in deposits and traffic through the first few weeks of May was not sustained during the remainder of the quarter."
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