Sales of new U.S. homes up – slightly

After taking a plunge in July, sales of new U.S. homes rose tepidly in August

Topics: Bloomberg, Housing Market, Financial Crisis, United States housing bubble, mortgage, U.S. Economy, , , , , ,

Sales of new U.S. homes up - slightly (Credit: Reuters/Mark Blinch)

Sept. 25 (Bloomberg) — Purchases of new U.S. homes rose in August, capping the weakest two months this year, showing the fallout from mortgage rates at a two-year high is cooling the real-estate rebound.

Sales increased 7.9 percent to a 421,000 annualized pace following a 390,000 rate in the prior month that was less than previously estimated, figures from the Commerce Department showed today in Washington. Demand slumped 14.1 percent in July. The median forecast of 77 economists surveyed by Bloomberg News called for 420,000.

The data highlight the risk that the run-up in borrowing costs pose for the housing rebound, which has boosted growth the past two years. Federal Reserve policy makers last week refrained from reducing the $85 billion pace of monthly bond buying, saying the tightening of financial conditions, if sustained, could slow the pace of improvement in the economy.

“The jump in mortgage costs is a significant factor in home purchase decisions, so the housing recovery will abate to some degree,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. At the same time, “inventories are still tight. There is still room on the supply side for builders to continue building more homes.”

The back-to-back readings were the weakest this year, and fell short of an average 446,000 rate in the first six months of 2013.

Economists’ sales estimates ranged from 385,000 to 450,000. The data for July was previously reported as 394,000.


Another report today showed orders for equipment such as computers and machinery climbed less than forecast in August, indicating a strengthening in business spending will take time to develop.

Bookings for non-military capital goods excluding aircraft increased 1.5 percent after a 3.3 percent drop in July, the Commerce Department reported. The median forecast of economists surveyed by Bloomberg projected a 2 percent gain. Demand for all durable goods, those meant to last at least three years, rose 0.1 percent after plunging 8.1 percent in July.

Stocks fell as concern grew that lawmakers in Washington won’t reach a budget deal. The Standard & Poor’s 500 Index declined 0.3 percent to 1,693.01 at 10:15 a.m. in New York.

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The median sales price for a new home increased 0.6 percent from August 2012, to reach $254,600, today’s report showed.

Purchases rose in three of four U.S. regions, led by a 19.6 percent jump in the Midwest. Sales dropped 14.6 percent in the West to an 82,000 annualized pace, the weakest since March 2012.

The supply of homes at the current sales rate fell to 5 months from 5.2 months in the prior month. There were 175,000 new houses on the market at the end of August, the most since March 2011.

New-home sales, tabulated when contracts are signed, are considered a timelier barometer than purchases of previously owned dwellings, which are calculated when a contract closes.

Newly constructed houses accounted for about 7 percent of the residential market in 2012, with resales accounting for the rest.

Sales of previously owned properties rose 1.7 percent in August to a 5.48 million annual rate, the most since February 2007, as buyers rushed to lock in interest rates that were starting to climb from near record-low levels, data from the National Association of Realtors showed last week. The number of existing houses on the market was 2.25 million at the end of August, the fewest for that month since 2002.

There are few signs the rise in mortgage rates will halt the housing rebound, according to homebuilder executives.


Lennar Corp., the third-largest U.S. homebuilder by revenue, said its fiscal third-quarter earnings rose as the company sold more houses and raised prices. The housing recovery “is still very much intact,” said Stuart Miller, chief executive officer of the Miami-based builder.

“We’ve experienced a slowdown in our sales pace and traffic in our community, as the consumer has adjusted to the change in the interest rate environment,” Miller said yesterday on a conference call with analysts. “But it is our belief that this change is mild and temporary given the extremely low levels of housing inventory in the market.”

Red Bank, New Jersey-based Hovnanian Enterprises Inc. reported a profit for its fiscal third quarter as net contracts climbed 1.8 percent and the contract backlog, an indication of future sales, jumped 18 percent.


The company is confident any hesitancy from its customers caused by the jump in borrowing costs “will be a temporary bump in the road to housing recovery,” Chief Executive Officer Ara Hovnanian said on a Sept. 9 conference call with analysts.

The rate on 30-year home loans averaged 4.50 percent in the week ended Sept. 19, close to the highest level since July 2011, according to data from McLean, Virginia-based Freddie Mac. The rate, which was as low as 3.81 percent at the end of May, began rising since Federal Reserve Chairman Ben S. Bernanke that month indicated the central bank may slow asset purchases.

The Fed last week maintained its $85 billion monthly pace of bond buying, saying it needs additional evidence of sustained improvement in the economy. “The tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement,” it said in a statement.

Builders began work on fewer homes than projected in August, Commerce Department figures showed earlier this month. Housing starts rose 0.9 percent, while permits, a proxy for future projects, dropped.

–With assistance from Ainhoa Goyeneche in Washington. Editor: Carlos Torres

To contact the reporters on this story: Shobhana Chandra in Washington at

To contact the editor responsible for this story: Christopher Wellisz at

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