U.S. New-Home Sales Dropped in July -- Update
23 August 2017 - 05:38PM
Dow Jones News
By Laura Kusisto and Sarah Chaney
U.S. new-home sales fell sharply in July, providing fresh
evidence that a shortage of housing inventory is depleting activity
across all segments of the market.
Purchases of newly built single-family homes, a narrow slice of
all U.S. home sales, decreased 9.4% to a seasonally adjusted annual
rate of 571,000 in July, the Commerce Department said
Wednesday.
"It has been surprising the extent to which new home sales have
not picked up more," said Aaron Terrazas, a senior economist at
Zillow. "It does seem to reflect a bit of a market breakdown."
Part of the problem, Mr. Terrazas said, is that high land and
construction costs are making it difficult to build homes at lower
price points, limiting the pool of buyers.
Overall, the housing market has settled into a pattern of rising
prices and flattening sales throughout much of the peak homebuying
season. A lack of new-home construction is dampening both new and
existing home sales activity, despite a strong economy.
A typical new home spent just 2.9 months on the market in July,
down from 3.6 months a year ago, suggesting demand remains strong
and buyers are snapping up homes nearly as soon as they are
finished.
Monthly new-home sales figures tend to be tumultuous, and so far
this year the market for new homes has been gradually trending
upward. Sales have risen 9.2% so far this year compared with the
same period a year earlier.
"We're still on track for a pretty healthy increase in new home
sales this year," said Lee Stafford, managing director of economics
and research at Ally Financial Inc.
New-home construction has been dropping, with a significant
slowdown in apartment building and gradual growth in new
single-family home construction. U.S. housing starts declined for
the fourth time in five months in July, the Commerce Department
reported last week. Total housing starts decreased 4.8% from the
previous month to a seasonally adjusted annual rate of 1.155
million.
But low inventory doesn't appear to be the only reason sales
were weak last month. At the current sales pace, there was a
5.8-month supply of new homes on the market at the end of July, the
highest level since 2015 although still below normal levels.
Recent surveys of consumer sentiment indicate that buyers also
perceive the market as frothy. Home prices have risen sharply over
the last couple of years, including in the new-home segment. The
median sale price for a new home sold in July was $313,700, up 6.3%
from a year earlier.
Builders remain largely optimistic about the market, saying they
still see significant pent-up demand from millennials and other
buyers who have been waiting on the sidelines until recently.
Traffic from buyers visiting new-home communities remains strong,
which suggests sales are poised to pick up in the months ahead.
Executives at Toll Brothers Inc., whose average-priced home is
around $800,000, said on an earnings call Tuesday they are seeing
increasing demand from first-time buyers even at high price points,
because many have waited until later in life.
"The leading edge of the millennials are becoming of age to buy
homes, and they are buying in their mid-30s, which means they're
more affluent. And so I'm not surprised. I'm actually surprised at
how slow the recovery has been. And that's why, I think, we have a
lot of runway out in front of us," said Douglas Yearley, chief
executive of Toll Brothers.
The National Association of Realtors reports sales of existing
homes, which represent the bulk of the U.S. housing market,
Thursday. Existing home sales fell 1.8% in June from the previous
month to a seasonally adjusted annual rate of 5.52 million.
Write to Laura Kusisto at laura.kusisto@wsj.com and Sarah Chaney
at sarah.chaney@wsj.com
(END) Dow Jones Newswires
August 23, 2017 12:23 ET (16:23 GMT)
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