New Home Sales Fall in June, on Pace for Record-Low Year
Sales of new homes fell 1 percent last month to an annual rate of 312,000, the Commerce Department said Tuesday. That's less than half the 700,000 homes sold per year that economists say is typical in healthy markets.
Last year was the worst for new-home sales on records dating back a half century. Through the first six months of this year, sales are lagging behind last year's totals.
In June, new-home sales fell to record lows in the Northeast and West. The median price of a new home rose to $235,200 in June because of the influx of spring buyers. The median price is not adjusted for seasonal factors.
A separate report showed home prices in major U.S. cities rose for the second straight month in May. But after adjusting for seasonal buyers, prices fell in a majority of markets.
The Standard & Poor's/Case-Shiller home-price index said prices increased in 16 of the 20 cities tracked. Over the last 12 months, prices have fallen in 19 of the 20 cities tracked.
Weakest Economic Sector
Housing remains the weakest part of the U.S. economy. High unemployment, larger down payment requirements and tougher lending standards are preventing many people from buying homes. And some potential buyers who can clear those hurdles are holding off, worried that home prices have yet to bottom out.
And those who are buying have more incentive to buy previously occupied homes. That's because foreclosures and short sales -- when the lender agrees to accept less than the mortgage is worth -- are forcing down home prices. That has made many re-sales a bargain compared with new homes.
Last year was the fifth straight year that new-home sales fell. That followed five straight years of record-high sales, when the housing market was booming.
Still, all home sales are weak. Sales of previously occupied homes fell for a third straight month in June and are lagging last year's sales of 4.91 million homes sold last year, the fewest since 1997. In a healthy economy, people buy roughly 6 million existing homes annually.
Impact on Jobs
While new homes represent less than one-fifth of the total housing market, they have an outsize impact on the economy. Each new home creates an average of three jobs and $90,000 in taxes, according to the National Association of Home Builders.
Renting has become a preferred option for Americans who lost their jobs during the recession and were forced to leave their rapidly depreciating homes. Since 1992, apartments had made up about 20 percent of home construction. Now, they make up closer to 30 percent of the market.
Foreclosure tracker RealtyTrac Inc. estimates that about 1.2 million homes will be foreclosed upon this year. An additional 1.7 million homes represent the nation's "shadow inventory" of homes that are at risk of foreclosure, according to real estate data firm CoreLogic.
Copyright 2011 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.
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