WASHINGTON (Reuters) -Sales of new U.S. single-family homes increased less than expected in June amid higher mortgage rates, pushing inventory to levels last seen in late 2007, which could keep homebuilding subdued.
New home sale units rose 0.6% to a seasonally adjusted annualized rate of 627,000 units last month, the Commerce Department’s Census Bureau said on Thursday. The sales pace for May was unrevised at a rate of 623,000 units.
Economists polled by Reuters had forecast new home sales, which make up more than 10% of U.S. home sales, would rise to a rate of 650,000 units. New home sales, which are counted at the signing of a contract, are volatile on a month-to-month basis and subject to big revisions.
They fell 6.6% on a year-over-year basis in June. The average rate on the popular 30-year fixed-rate mortgage has hovered just under 7% this year after the Federal Reserve paused its interest rate cuts amid concerns that President Donald Trump’s protectionist trade policy would stoke inflation.
The Fed is expected to keep its benchmark overnight interest rate in the 4.25%-4.50% range at the conclusion of its policy meeting next week. The U.S. central bank cut rates three times in 2024, with the last move coming in December.
Government data last week showed single-family homebuilding dropped to an 11-month low in June while permits for future construction declined to more than a two-year low. Economists expect that residential investment, which includes homebuilding and home sales through broker commissions, likely remained a drag on gross domestic product in the second quarter.
Sales last month increased 5.1% in the densely populated South. They advanced 6.3% in the Midwest, but plunged 27.6% in the Northeast and dropped 8.4% in the West.
The inventory of unsold homes on the market increased to 511,000 units, the highest level since October 2007, from 505,000 in May. At June’s sales pace it would take 9.8 months to clear the supply of new houses on the market, up from 9.7 months in May. The inventory glut is weighing on new house prices.
The median new house price dropped 2.9% to $401,800 in June from a year earlier. A National Association of Home Builders survey last week showed the share of builders cutting prices to attract buyers rose in July to the highest level since 2022.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
