The drumbeat of positive news on the US residential real-estate front ended with a thud on Friday as sales of new houses slumped.
Purchases fell 6.8 percent in June to a 482,000 annualized pace, the weakest since November and lower than any forecast of economists surveyed by Bloomberg, Commerce Department data showed in Washington.
Making matters worse: Readings for each of the prior three months were revised down.
The report was at odds with recent data that showed demand for existing homes climbed in June to an eight-year high, construction began on more projects and builders were gaining confidence.
Even economists who had projected new-home sales cooled last month were quick to say the severity of the setback was probably overstated because these figures tend to be volatile from month to month.
“The outlook for housing still remains positive” thanks to more jobs, rising household formation and low interest rates, said Ward McCarthy, chief financial economist at Jefferies Llc. in New York, whose estimate of 525,000 was the second-lowest in the Bloomberg survey. “Of all the housing numbers, this is probably subject to the most revision. I don’t think you want to hang your hat on it necessarily.”
Stocks fell for a fourth day as shares of raw-material producers sank amid a drop in commodity prices and an unexpected decline in Chinese manufacturing. The Standard and Poor’s (S&P) 500 Index fell 0.6 percent to 2,088.67 at 1:05 p.m. in New York. The S&P Supercomposite Homebuilding Index dropped 2.3 percent.
The median estimate of 74 economists surveyed by Bloomberg called for a 548,000 pace for new-home sales. Forecasts ranged from 510,000 to 569,000.
The reading for May was trimmed to 517,000 from a previously reported 546,000, which had been a seven-year high.
The revisions suggest the June data is also likely to be tweaked. The report said there was 90-percent confidence the change in sales last month ranged from a 19.3-percent drop to a 5.7-percent gain.
New-home purchases were up 17.5 percent in June from the same month in 2014 on an unadjusted basis, the Commerce Department’s report showed.
“There’s no question the housing sector kicked into a higher gear in the second quarter, but this might be a dose of reality that the acceleration is not as sharp as it had looked,” McCarthy said. “Is this a blip, or has some of the other data been misleading? We really won’t know the answer to that until next month.”
Adding to the bad news, the median price of a new home was $281,800 last month, down 1.8 percent from a year earlier.
Three of four regions suffered setbacks, indicating broad-based weakness. The West led the way, showing a 17-percent slump. Only the Northeast showed an increase.
Sales of new properties, which are counted when contracts are signed, are usually considered a more timely measure of the market than previously owned dwellings, which are counted when a purchase is finalized.
Sales of existing homes climbed 3.2 percent to a 5.49 million annualized rate, the most since February 2007, the National Association of Realtors said on Wednesday. Prices also climbed amid a tight supply of available properties.
Reports last week showed building permits for single and multifamily projects rose last month to an almost eight-year high, and housing starts climbed in June to the second-highest level since November 2007 as builders boosted work on apartment projects.
Executives at housing-related companies such as paint manufacturer Sherwin-Williams Co. have also been optimistic.
It’s “not just the homes that are being put in place, the existing homes that are trading hands, but also the overall appreciation in home values that we’ve seen in the market should drive remodeling and repaint activity,” Bob Wells, the company’s senior vice president of investor relations, said on a July 16 conference call. “Three more years to this recovery to reach a peak is certainly foreseeable.”