U.S. May New Home Sales Fall 0.2% to 875,000
(Correct)
By Siobhan Hughes
U.S. May New Home Sales Fall 0.2% to 875,000 (Correct)
(Corrects title of report to new home sales in headline)
Washington, June 29 (Bloomberg) -- U.S. sales of new single- family homes fell
in May to the lowest level in eight months, further evidence housing demand is
tapering off, government figures showed.
New home sales fell 0.2 percent last month to a seasonally adjusted annual rate
of 875,000 units from a revised pace of 877,000 units in April, the Commerce
Department said. Sales fell in the northeastern and western U.S.
``New home sales are beginning to drift a little lower,'' said John Faulhaber, vice
president of residential mortgages with Bank of Montreal and Harris Bank in
Chicago, before the report. ``Going forward it won't be quite as strong as it has
been over the last couple months. We see a little bit less traffic, a little bit fewer
applications.''
May's sales rate was the slowest since 848,000 units in September. Analysts
expected new home sales at an annual rate of 900,000 units in May after a
previously reported 909,000 April pace.
Mortgage rates have been rising since the Federal Reserve's six interest rate
increases over the past year. Today's report suggests home buyers may be
starting to feel the pinch.
Fed policy-makers voted yesterday to leave the overnight bank lending rate at a
nine-year high of 6.5 percent and signaled that rate increases were possible
down the road if the economy doesn't slow enough to keep inflation in check. The
housing industry is one that's usually most affected by changes in Federal
Reserve interest rates.
Today's report follows industry statistics released Monday that showed sales of
previously owned homes also unexpectedly rose last month. Home resales rose
4.3 percent in May to an annual rate of 5.09 million after falling in April.
Still, construction data for May show a slowdown. Starts of new homes and
apartments fell 3.9 percent last month after rising 1.6 percent in April. The
decline was led by a 5.4 percent decrease in single-family houses, the fourth
drop in five months.
Mortgage Rates
The average interest rate on a 30-year mortgage was 8.14 percent in the week
ended June 23, compared with a rate of 7.63 percent in the same period a year
earlier, according to data from Freddie Mac, the No. 2 buyer of U.S. mortgages.
A $100,000 mortgage at last week's rate would require a monthly payment of
$743.55 a month in principal and interest, compared with $708.14 a year earlier.
By region, sales declined 24.4 percent in the Northeast to a 62,000 seasonally
adjusted annual rate, and they fell 3 percent in the West to 224,000 at an annual
pace. In the Midwest, sales rose 7.4 percent to 159,000 units. Sales rose 3.1
percent in the South to a 430,000-unit annual rate.
At the May pace, the inventory of available homes rose to 4.5 months' worth from
4.4 months' worth in April. The number of homes available for sale rose to
322,000 units in May from 319,000 in April.
The median price of a new home rose 3.1 percent to $165,000 in May from
$160,000 in April.
Higher Prices
Higher prices and rising mortgages haven't caused housing to plunge. New home
sales are on a pace to reach 905,000 this year, close to a record 907,000 units
sold last year.
``We are still seeing a high rate of demand,'' said James Zeumer, vice president
of corporate communications at Pulte Corp., a home builder in Bloomfield Hills,
Michigan. ``You've got very strong employment levels and very strong consumer
confidence.''
Unemployment was 4.1 percent in May, holding near April's 30- year low of 3.9
percent, the Labor Department said earlier this month. Meanwhile, consumer
confidence in June fell from a record high a month earlier, suggesting spending is
unlikely to slow much in coming months.
Plentiful jobs and a sense of well-being helped buoy sales of previously owned
homes in May by 4.3 percent to a seasonally adjusted annual rate of 5.09 million
homes, the National Association of Realtors said this week.
``Mortgage rates have had a cooling on the demand for new homes,'' said Stuart
Miller, chief executive of Lennar Corp. in a conference call last week. Still, ``all of
the indications suggest that the new home market will remain strong.''
New Challenges
Even so, home buyers are facing new challenges. For one, purchasers are less
able to sidestep the full effects of higher interest rates though one-year
adjustable rate mortgages, used by people who wouldn't otherwise qualify for a
home loan. The spread between one-year and 30-year rates was 2.5 percentage
points a year and a half ago, compared with less than a full percentage point
today.
``The difference is narrowing,'' said Gopal Ahluwalia, director of research at the
National Association of Home Builders in Washington. ``People don't like it and
the number of people who will take the adjustable is reduced. It has an effect on
them of not buying, or buying a lesser home, or postponing a decision to buy.''
That's why builders expect a further slowdown in the months ahead. The National
Association of Home Builders' housing market index, a gauge of home builders'
expectations, fell to 58 in June from a revised 62 in May. June's reading was the
lowest since November 1997 when the index was 56.
``This is likely the beginning of a gradual and expected slowing following two
years of exceptional strength in the single- family housing market,'' said
association president Robert Mitchell, a builder in Rockville, Maryland, when the
home builders' report was released earlier this month.
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