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WASHINGTON — Sales of new U.S. single-family homes fell in June, but the trend remains strong as an acute shortage of previously owned homes underpins demand.
New home sales dropped 2.5% to a seasonally adjusted annual rate of 697,000 units last month, the Commerce Department said on Wednesday. May's sales pace was revised lower to 715,000 units from the previously reported 763,000 units.
Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, dropping to a rate of 725,000 units.
New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. They, however, can be volatile on a month-to-month basis. Sales increased 23.8% on a year-on-year basis in June.
With the inventory of existing homes near historically low levels and multiple offers on some properties, potential buyers are seeking out new houses, driving up homebuilding.
The shortage is also boosting house prices, which had been in retreat or declining earlier this year as higher mortgage rates pushed buyers to the sidelines. According to the National Association of Home Builders, fewer builders were offering incentives, including cutting prices to increase sales.
Overall, the housing market continues to stabilize, but higher mortgage rates and the renewed house price appreciation could delay a recovery. The Federal Reserve is expected to raise interest rates by 25 basis points on Wednesday after keeping borrowing costs steady in June. The U.S. central bank has hiked its policy rate by 500 basis points since March 2022.
Last month, new home sales jumped 20.6% in the Northeast and increased 4.3% in the densely populated South. But they declined 13.9% in the West and tumbled 28.4% in the Midwest.
The median new house price in June was $415,400, a 4.0% drop from a year ago. There were 432,000 new homes on the market at the end of last month, up from 429,000 in May. At June's sales pace it would take 7.4 months to clear the supply of houses on the market, up from 7.2 months in May.
