New-home sales plunged 9.4% in July; outlook still positive

August 23, 2017

New-home sales plunged 9.4% in July; outlook still positive

New-home sales plunged 9.4 percent from June's 630,000 annualized units to 571,000 annualized units in July and were down 8.9 percent from a year ago.

The Census Bureau report, released Wednesday, showed new-home sales have been slowly trending upward. Sales from April through June were revised higher by 46,000 combined.

"According to the Census Bureau, new home sales unexpectedly tumbled to a seven-month-low in July," NAFCU Research Assistant Yun Cohen said in NAFCU Macro Data Flash. "Sales also fell year over year for the first time since February 2016. Both home prices and mortgage rates rose modestly in July, which posed a headwind to buyers. However, borrowing costs have since returned to their June levels."

Sales declined in three of the four regions in July. Sales in the small and volatile Northeast decreased by 23.8 percent, followed by the West (-21.3 percent) and the South (-4.1 percent). Sales in the Midwest increased 6.2 percent.

Based on current-month sales, there were 5.8 months of supply in July, up from 5.2 months in June. The number of unsold homes left on the market rose from 272,000 to 276,000 units. This represents a 16.5 percent increase from a year ago.

The median new home price, non-seasonally adjusted, increased from $311,600 in June to $313,700 in July, according to the Census Bureau. July's prices were 6.3 percent higher than a year ago.

"Overall, the outlook for housing remains positive in light of a strong labor market and improving rates of household formation," Cohen added.

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