Purchases of new U.S. homes plunged in July by the most in more than three years and previous months were revised down, a sign that growth in the industry may be taking a pause as mortgage rates rise.
Sales of newly built homes declined 13.4% to a 394,000 annualized pace, the weakest since October, following a 455,000 rate in the prior period that was lower than previously estimated, Commerce Department figures showed today in Washington. The median estimate of 74 economists surveyed by Bloomberg called for a decrease to 487,000. Last month’s decline was the biggest since May 2010.
Builders are holding back amid constraints on available land and materials in a bid to boost prices and revenue. At the same time, more jobs and pent-up demand may help sustain gains in housing as homebuyers rush to take advantage of historically low borrowing costs before they rise further.
“The housing recovery itself is likely to take a bit of a breather,” Millan Mulraine, director of U.S. rates research at TD Securities USA LLC in New York, said before the report. “It means at the margin that housing is not going to provide the lift to the economy that it would have before.”
Stocks were little changed after the report, trimming earlier gains. The Standard & Poor’s 500 Index fell 0.1% to 1,655.2 at 10:03 a.m. in New York. The S&P Supercomposite Homebuilding Index dropped 3%.
Last month’s sales pace was lower than any estimate of economists surveyed, which ranged from 445,000 to 525,000 after a previously reported 497,000 pace in June. Sales data going back to April were revised down.
New-home purchases were 6.8% higher in July than the same period in 2012 on an adjusted basis, today’s report showed. The median price of a new home increased 8.3% last month from a year ago to $257,200.
Purchases declined in all four regions in July, paced by a 16.1% slump in the West.
The supply of homes at the current sales rate rose to 5.2 months from 4.3 months in June. There were 171,000 new houses on the market at the end of July, up from 164,000 the month before.
Sales of new properties, which are tallied when purchase contracts are signed, are considered a more timely measure of the market than sales of previously owned dwellings, which are counted when a sale is final.