Sales of U.S. New Homes Dropped to Record Low in July
Sales of U.S. New Homes Dropped to Record Low in July
George Frey/Bloomberg
Newly completed homes stand in St. George, Utah.
Newly completed homes stand in St. George, Utah. Photographer: George Frey/Bloomberg
Aug. 25 (Bloomberg) -- Michael Feder, chief executive officer of Radar Logic Inc., talks about U.S. home prices and the outlook for the housing market. U.S. home prices fell 1.6 percent in the second quarter from a year earlier as record foreclosures added to the inventory of properties for sale. Sales of new homes unexpectedly dropped in July to the lowest level on record. Purchases fell 12 percent from June to an annual pace of 276,000, the weakest since data began in 1963, according to the Commerce Department. Feder speaks with Margaret Brennan on Bloomberg Television's "InBusiness." (Source: Bloomberg)
Aug. 25 (Bloomberg) -- Bloomberg economist Joseph Brusuelas discusses July U.S. new home sales, which fell 12 percent from June to an annual pace of 276,000, the lowest level on record. Brusuelas, speaking with Margaret Brennan on Bloomberg Television's "InBusiness," also discusses durable-goods orders data and Federal Reserve policy outlook. (Joseph Brusuelas is a Bloomberg economist. The opinions expressed are his own. Source: Bloomberg)
Aug. 25 (Bloomberg) -- David Resler, chief economist at Nomura Securities, talks about the outlook for the U.S. housing market. Resler, speaking with Deirdre Bolton on Bloomberg Television's "InsideTrack," also discusses the impact of housing on the economy. (Source: Bloomberg)
Sales of U.S. new homes unexpectedly dropped in July to the lowest level on record, signaling that even with cheaper prices and reduced borrowing costs the housing market is retreating.
Purchases fell 12 percent from June to an annual pace of 276,000, the weakest since data began in 1963, figures from the Commerce Department showed today in Washington. The median price of $204,000 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 labor 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.”
Stocks held earlier losses after the report. The Standard & Poor’s 500 Index fell 0.4 percent to 1,047.83 at 11:53 a.m. in New York. Treasury securities rose, sending the yield on the benchmark 10-year note down to 2.47 percent from 2.49 percent late yesterday.
Homebuilder shares gained on speculation the worst of the decline is over, said Jack Micenko, an analyst at Susquehanna International Group LLP. The S&P Supercomposite Homebuilding Index rose 2.2 percent. Toll Brothers Inc. reported today its first quarterly profit since 2007 after a tax benefit and a drop in writedowns.
Durables Orders
Another Commerce Department report today 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 0.3 percent, compared with the 3 percent 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 4.8 percent from July 2009.
Purchases fell in all four regions, led by a 25 percent drop in the West.
Supply of Homes
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 27 percent last 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.
Shadow Inventory
Foreclosures and short-sales are boosting the so-called shadow inventory, and competing with builders trying to sell properties as well. Home seizures increased almost 4 percent in July from the previous month, with 325,229 properties last month getting a notice of default, auction or bank repossession, RealtyTrac Inc. said Aug. 12.
Housing’s inability to build on the temporary boost generated by government assistance is one reason the economy is having trouble strengthening.
Toll, the largest U.S. luxury homebuilder, said today that buyers signed contracts for 701 homes in the three months ended in July compared with 837 houses in the same period last year. Net income for the Horsham, Pennsylvania-based builder was $27.3 million, compared with a loss of $472.3 million a year earlier.
“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.”
Builder Confidence
The National Association of Home Builders/Wells Fargo confidence index this month dropped to the lowest level since March 2009.
The Department of Housing and Urban Development plans to make loans of as much as $50,000 for borrowers “in hard hit local areas” to make mortgage, tax and insurance payments for as long as two years, according to an Aug. 11 statement. The Treasury Department will also provide as much as $2 billion in aid under an existing program for 17 states and the District of Columbia, according to the statement.
Also helping support some demand, mortgage rates have declined. The average rate on a 30-year fixed mortgage dropped to a record-low 4.42 percent in the week ended Aug. 19, according to Freddie Mac.
Private payrolls rose a less-than-forecast 71,000 in July and were revised down for the previous month, the Labor Department reported Aug. 6. Economists surveyed by Bloomberg forecast unemployment will end the year at 9.5 percent, unchanged from the rate in June and July.
To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net
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