The pace of new single-family home sales dipped 4.3 percent in July to a seasonally adjusted annual rate of 1.072 million units, the U.S. Commerce Department reported. The sales pace was down by 21.6 percent from the record monthly high set last July. On a year-to-date basis, actual new-home sales were down 14.2 percent compared with the first seven months of 2005.
“The slowdown in demand has been on our builders’ radar screens since the middle of last year,” said National Association of Home Builders (NAHB) President David Pressly. “Builders have been offering sales incentives and slowing their production as demand cools and inventories rise, and our surveys suggest that the downward correction in sales from last year’s record pace still is underway.”
“The current downswing in home sales reflects both falling affordability and a pullout by investors/speculators that were a major factor behind the unsustainable pace of new home sales last year,” said NAHB Chief Economist David Seiders. “We’ve seen an inevitable mid-cycle correction of housing market activity from the records posted last year.”
Two of four regions across the country posted decreases in the pace of new home sales in July. Sales were down in the Midwest by 21.3 percent and in the South by 8.0 percent. The sales pace in the West was up by 11.7 percent and up in the Northeast by 1.8 percent. All regions reported substantially lower sales on a year-to-date basis.
The inventory of new homes for sale rose to 568,000 units at the end of July, a 6.5 months’ supply at the current sales pace. Units that were permitted but not yet started represented slightly more than 18 percent of the inventory level; units still under construction were more than 57 percent of the inventory; and completed homes for sale were about 24 percent of the total. The median length of time that completed homes for sale were on the market was 3.8 months in July, compared with 3.7 months a year earlier.
“With respect to the housing market outlook, we’re counting on solid demographic foundations, forward economic momentum, a favorable interest-rate structure and aggressive builder sales incentives to limit the depth and duration of the current downswing in new homes sales,” Seiders said. “We expect the market to bottom out during the first half of next year and then move to a solid, sustainable trend.”
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