Sales of U.S. new homes unexpectedly fall to seven-month low

Sales fell 6.8 per cent to a 482,000 annualized pace, the weakest since November.
Sales fell 6.8 per cent to a 482,000 annualized pace, the weakest since November. PHOTO: AFP

WASHINGTON (BLOOMBERG) - Purchases of new U.S. homes unexpectedly retreated in June and prior readings were revised down, painting a picture of less robust improvement during the industry's busiest time of year.

Sales fell 6.8 per cent to a 482,000 annualized pace, the weakest since November and lower than any forecast of economists surveyed by Bloomberg, Commerce Department figures showed Friday in Washington. Three of four regions suffered setbacks.

The report represents a departure from recent data that's shown the housing industry was accelerating amid steady job growth and still-low mortgage rates. That may mean the residential real estate market is about to plateau as a tight supply of available homes and meager wage gains present hurdles to growth.

"There's no question the housing sector kicked into a higher gear in the second quarter, but this might be a dose of reality that the acceleration is not as sharp as it had looked," said Ward McCarthy, chief financial economist at Jefferies LLC in New York, whose estimate of 525,000 was the second-lowest in the Bloomberg survey.

"The outlook for housing still remains positive," thanks to more jobs, rising household formation and good affordability levels.

Builder shares sank after the report. The Standard & Poor's Homebuilding Supercomposite Index fell 1.3 per cent at 10:21 a.m. in New York. The S&P 500 fell 0.3 per cent to 2,096.75.

The median estimate of 74 economists surveyed by Bloomberg called for a 548,000 pace for new-home sales. Forecasts ranged from 510,000 to 569,000. The reading for May was revised down to 517,000 from a previously reported 546,000, which had been a seven-year high. Figures for April and March were also revised down.

The revisions suggest the June data should also be considered as preliminary. The report said there was 90 per cent confidence the change in sales last month ranged from a 19.3 per cent drop to a 5.7 per cent gain.

"Of all the housing numbers, this is probably subject to the most revision," said Mr McCarthy. "I don't think you want to hang your hat on it necessarily."

New-home purchases were 17.5 per cent higher in June than the same period in 2014 on an unadjusted basis, the Commerce Department's report showed.