Fewer new homes were sold in June after sales surged in May, a sobering break from the recent positive housing market news.
According to a report by the Commerce Department released Wednesday morning, sales of new homes declined 8.4 percent from the prior month to a seasonally adjusted annual rate of 350,000.
“I don’t take as much of a grim attitude as others have,” said David Crowe, chief economist at the National Association of Home Builders. “Month to month, it’s a drop. But if you look at quarter-to-quarter averages, which is really more reasonable with this particular data series since it has a lot of volatility, it’s a little over a 3 percent growth.. . . I don’t think it’s intrinsic evidence of anything in the marketplace. I think it’s just the way the data is collected.
“All the other conditions, including the NAHB monthly builders’ sentiment survey, interest rates, housing prices, so far are all indicative of a continued, modest improvement, and this is, too, if you look at it from first quarter to second quarter.”
Sales in the Northeast took the biggest drop, falling 60 percent to their lowest level since November. Much of that change was because May’s number swelled to a yearly high of 40,000, before falling to a six-month low of 16,000. The statistics are estimated from sample surveys and primarily based on a sample of houses selected from building permits.
“That isn’t an indication that there’s this wild gyration in people’s attitudes in buying a home,” Crowe said. “It just means that the data is collected in a way that causes it to go up and down pretty radically.”
Crowe cites two reasons for the drop in the numbers: low inventory and the inability for builders to secure loans from lenders. Inventory of new homes is near historic lows. There were only 144,000 new homes on the market in June, up slightly from 143,000 homes in May, which was the lowest inventory since the data started being collected in 1963.
Also, builders who have weathered the worst of the housing crisis tend to be the most business-savvy. They are cautious about adding any inventory unless they are assured of selling it. Only about one out of every 12 homes currently on the market is a new home.
“That has left the new home market somewhat less competitive because there are so few choices,” Crowe said. “It’s another reason why it’s difficult to have new home sales, because a buyer has more options on the existing market.”
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