WASHINGTON: New US single-family home sales unexpectedly fell in July, dropping to their lowest in seven months amid a surge in prices, raising concerns of a slowdown in the housing market recovery.
Coming on the heels of data this month showing a tumble in home building and permits in July, the weak sales pace suggests that housing could remain a drag on economic growth in the third quarter.
“The third-quarter sales data are starting out significantly below the second-quarter average, and many other housing reports have also shown some recent weakening in their respective trends,” said Daniel Silver, an economist at JPMorgan in New York. “Today’s report strengthens our conviction that real residential investment will decline in the third quarter.”
The Commerce Department said on Wednesday new home sales declined 9.4 per cent to a seasonally adjusted annual rate of 571,000 units last month, the lowest level since December 2016. The percentage drop was the largest since August 2016 and confounded economists’ expectations for a 0.3 per cent gain.
June’s sales pace was revised up to 630,000 units from the previously reported 610,000 units. Home sales in May also were not as weak as previously reported, taking some of the sting from July’s report.
New home sales, which account for 9.4 per cent of overall housing sales, are volatile month-to-month and are drawn from building permits. Still, sales declined 8.9 per cent on a year-on-year basis, the first annual drop since February 2016.
July’s sales pace was below the second-quarter average of 613,000 units. Sales fell in the Northeast, South and West, but rose in the Midwest. In a separate report on Wednesday, the Mortgage Bankers Association said applications for loans to buy a house decreased last week to a six-month low. A survey last month by Fannie Mae, the largest US mortgage guarantor, showed a drop in the share of respondents saying now is a good time to buy a home as well as a surge in the number of those who believe this is a bad time to buy. Housing subtracted nearly three-tenths of a percentage point from gross domestic product in the second quarter.
US financial markets were little moved by the data as investors worried over comments by President Donald Trump threatening a government shutdown to secure funding for a border wall with Mexico, raising the spectre of a tough budget battle.
Trump also said late on Tuesday he might terminate the NAFTA trade treaty with Mexico and Canada after three-way talks failed to bridge deep differences.
The PHLX index of housing stocks fell in line with a broadly weaker US stock market.
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