New Home Sales Rose 23.6% in June in Unexpected Rebound From May's Record Low

Despite improvement, housing market remains stuck at a historically low level

New home sales rose to a rate of 330,000 sold in June, 23.6% higher than the historically low revised rate of 267,000 homes sold nationwide in May, the U.S. Commerce Department reported Monday, July 26.

Although the strength of the rebound surprised economists, who had expected about 314,000 U.S. homes to be sold in June, last month's sales level was the second lowest on record since 1963. The seasonally adjusted annual rate of 330,000 is 16.7% lower than the 396,000 homes sold in June 2009.

The median sales price of new houses sold in June 2010 was $213,400, and the average sales price was $242,900, according to the Commerce Department's news release. That compares to a median sales price in May 2010 of $200,900 and an average sales price of $263,400.

In June, the positive effects from the $8,000 first-time homebuyer's tax credit had faded away, leaving the housing market without the federal government's support.

"The June new home sales data and the downward revision to May confirm only that 300,000 is rock bottom in an economy with 310 million people," said Steve Blitz, senior economist with New York-based Majestic Research, in an analyst note. "That level of sales is the average of the past two months and there is nothing in today's data to suggest anything more than the random volatility inherent in a monthly survey. These sales figures remain the lowest since the 1982 recession, when there were about 100 million fewer people in this country."

The Commerce Department also reported that the number of new houses for sale at the end of June was 210,000, representing a supply of 7.6 months at the current sales rate. Those numbers suggested an improvement over May, when supply was estimated at 8.5 months on 213,000 homes.

However, Blitz said, the improvement in the inventory data speaks more to how homebuilders are managing inventory than to an increase in demand.

"Mortgage applications for purchase and the survey of homebuilders suggest no upturn in demand in July, and the peak selling season is now behind us. Through the first half of this year 183,000 new homes were sold compared with 188,000 in 2009 - despite the tax credit and an improving economy. The difference between then, when the economy was tanking and shedding workers, and now, with a modest recovery underway, is that people then probably thought the drop in home prices and mortgage rates would be short lived. People now know different," Blitz said.

Read a story about May's new home sales from the archives of InvestmentAdvisor.com.
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