New U.S. single-family home sales unexpectedly fell in July, dropping to their lowest in seven months, which could raise concerns of a slowdown in the housing market recovery.
The Commerce Department said on Wednesday new home sales tumbled 9.4 percent to a seasonally adjusted annual rate of 571,000 units last month, the lowest level since December 2016. The percentage drop was the largest since August 2016 and confounded economists’ expectations for a 0.3 percent gain.
June’s sales pace was revised up to 630,000 units from the previously reported 610,000 units. Home sales in May also were not as weak as previously reported, taking some of the sting from July’s report.
New home sales, which account for 9.4 percent of overall housing sales, are volatile month-to-month and are drawn from building permits. Still, sales declined 8.9 percent on a year-on-year basis.
Coming on the heel of data this month showing a plunge in both housing starts and permits in July, the unexpected decline in new home sales suggests the housing market could be cooling.
A separate report from the Mortgage Bankers Association on Wednesday showed applications for loans to buy a house decreased last week.
The PHLX index of housing stocks fell 0.42 percent, in line with an broadly weaker stock market. Shares in the nation’s largest homebuilder, D.R. Horton, declined 0.56 percent and Lennar Corp slipped 0.54 percent. Pultegroup stock fell 0.59 percent.
The housing market is being hampered by a shortage of properties, which is driving up home prices. The new housing market has not capitalized on the acute shortage because of supply constraints facing builders, including labor, land and finance.
Housing weighed on the economy in the second quarter, subtracting nearly three-tenths of a percentage point from gross domestic product. Economists expect a modest rebound in housing activity in the third quarter.
The housing market remains underpinned by a strong labor market, which is near full employment. Last month, 70 percent of the new single family homes sold were either yet to be built or under construction in July. New home sales fell in the Northeast, South and West. They rose in the Midwest.
The inventory of new homes on the market rose 1.5 percent to 276,000 units last month, the highest level since June 2009. Still, new housing stock is less than half of what it was at its zenith during the housing bubble.
At July’s sales pace it would take 5.8 months to clear the supply of houses on the market, up from 5.2 months in June. A six-month supply is viewed as a healthy balance between supply and demand. The median price of a new home increased 6.3 percent in July from a year ago to $313,700.