New Home Sales Slump Continues

Sales of new single-family homes fell 6.6 percent in June to a seasonally adjusted annual rate of 834,000 units as home buyer demand continued to weaken, according to figures released by the U.S. Department of Commerce. The National Association of Home Builders (NAHB) stated that the June sales pace was 22.3 percent below a year earlier and down 40 percent from the housing market peak in mid-2005.

“The ongoing contraction in home sales is consistent with NAHB’s surveys of single-
family builders. Our Housing Market Index now is down to the lowest level since January 2001, when the national economy was in recession,” said Brian Catalde, president of the NAHB and a homebuilder from El Segundo, Calif.

The inventory of new homes for sale was 537,000 in June, equaling May inventory figures, although the equivalent months’ supply at the June sales pace edged up to 7.8 months, up from 7.4 months in May.

“A significant increase in prime mortgage interest rates, along with the tightening of mortgage standards in subprime and other components of housing finance, clearly weighed on home buying in June,” said David Seiders, a NAHB chief economist. “Home builders continue to trim prices and offer large nonprice sales incentives, but many prospective home buyers obviously are reluctant to sign on the bottom line.”

“We still expect to see signs of stabilization later this year, although downside risks appear to be mounting,” he said.

Completed homes for sale were 33 percent of the inventory, while units still under construction represented almost 51 percent of the inventory, and units for sale that were permitted but not yet started represented 16 percent of the inventory level—no change from the month before. The median length of time that completed homes were on the market was 6.0 months in June, up from 5.7 months in May.

Regionally, new home sales in June were up 7.6 percent in the South. However, sales were down by 27.1 percent in the Northeast, 17.1 percent in the Midwest and 22.5 percent in the West.

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