2014’s New Home Market Is ‘Running in Place’
Sales of new single-family homes clung to their same bumpy path again last month, unexpectedly slipping to their weakest annual pace since March, the Census Bureau said Monday.
Neither markedly stronger nor dramatically weaker, sales over the past 10 months haven’t moved much.
“The new-home sales figures by now have that lived-in feeling, with few signs of a significant change, in either direction, over the near term,” said Richard Moody, chief economist of Regions Financial.
The new-home market is “basically running in place,” he said in e-mailed comments Monday.
July’s seasonally adjusted annual rate was 412,000, down 2.4% from June’s higher revised rate of 422,000, the Census Bureau said. Previously reported sales rates for April and May also were revised up.
Economists had expected an annual sales rate of 428,000 for July, according to Action Economics’ median forecast.
With more than half the year over, the figures Census announced Monday show the pace of new-home sales is running 1.8% behind a year ago. Only in the South are year-to-date sales ahead of last year, up 5.4%. The Northeast is down 19%, the West is down 11% while the Midwest’s sales trail last year’s pace by 3%.
July’s median sales price was $269,800, the lowest since February and down 3.7% from June.
A bright spot: The supply of new homes for sale was the highest in almost four years. Census’ seasonally adjusted estimate was 205,000 in July, a six-month supply at last month’s sales rate and slightly better than June’s 5.8-months estimate. A six-month supply is considered a balanced market between buyers and sellers.
The latest numbers reinforce the picture of a housing recovery that continues to disappoint forecasters but shows enough strength to keep alive hopes that a stronger performance is just around the corner as the broader economy and employment improve.
Housing starts in July rose almost 16% to a seasonally adjusted rate of nearly 1.1 million units, although much of the growth is coming in apartment buildings. For the year, construction of single-family homes is up less than 1% from January-July 2013 while multifamily construction is up 17.5%.
Sales of existing homes — single-family homes as well as townhouses, condominiums and co-ops — have risen from the previous month for four straight months. But January-July sales overall and for single-family homes alone are behind last year’s pace.
Meanwhile, mortgage rates are at their lowest levels of 2014. The U.S. average for a 30-year mortgage is 4.10% compared with 4.58% a year ago, Freddie Mac reported last week.
IHS Global Insight economists Patrick Newport and Stephanie Karol said July’s slowdown in new-home sales is a temporary result of an inadequate supply of new homes relative to what’s available in existing homes.
That’s likely to change in coming quarters based on increasing numbers of housing starts and building permits that indicate builders’ construction plans, they said.
“The low level of first-time home buying is a risk factor,” Newport and Karol said in a research note Monday. “When move-up demand accounts for such a vast majority of existing-home sales, it implies a low rate of household formation and thus low demand for new housing stock.”
Source: USA Today