RTTNews - With new home prices moving back to the downside, the Commerce Department released a report on Monday showing that new home sales in the month of June increased by much more than economists had been anticipating.
The report showed that new home sales jumped 11 percent to an annual rate of 384,000 in June from the revised May rate of 346,000. With the increase, new home sales rose to their highest rate since 390,000 in November of 2008.
While sales were down 21.3 percent compared to the same month a year ago, they still came in well above the economists' expectations. Economists had expected sales to rise to 352,000 from the 342,000 originally reported for the previous month.
Commenting on the data, Peter Boockvar, equity strategist at Miller Tabak noted, The federal $8,000 tax credit for 1st time buyers and the $10,000 California tax credit for new homes are certainly helping.
A sustainable improvement not induced by tax credits will still take time as the home ownership rate heads lower, Boockvar added.
Strong sales growth in the Midwest contributed to increase in sales, with new home sales in the Midwest surging up 43.1 percent. New home sales in the Northeast and West also jumped 29.2 percent and 22.6 percent, respectively, while sales in the South edged down 5.3 percent.
The stronger than expected sales growth came amid a pullback in prices, with the median sales price of new houses sold in June falling 5.8 percent to $206,200 from $219,000 in the previous month. The median sales price had increased for two consecutive months.
On an annual basis, the median sales price for June was down 12 percent from $234,3000 in the same month a year ago.
The report also showed that the average sales price in June was $276,900, down slightly from $277,000 in May and down 7.5 percent from June of 2008.
With the jump in sales, the seasonally adjusted estimate of new houses for sale at the end of June was 281,000, down 4.1 percent from 293,000 in May.
This represents a supply of 8.8 months at the current sales rate compared to 10.2 months of supply in the previous month. With the decrease, the months supply rate fell to its lowest level since October of 2007.
Last Thursday, the National Association of Realtors released a report showing that existing home sales increased for the third consecutive month in June, with sales rising by more than economists had been expecting.
The report showed that existing home sales rose 3.6 percent to an annual rate of 4.89 million units in June from a downwardly revised rate of 4.72 million in May. Nonetheless, sales were down 0.2 percent compared to the 4.90 million-unit level in the same month a year ago.
Economists had expected sales to rise to a 4.84 million unit rate from the 4.77 million unit rate originally reported for the previous month.
New home sales make up about 15 percent of the overall housing sector, Boockvar said. So, the existing home sales data is more relevant in terms of trends and inventory, but today's data is still a move in the right direction as we bounce along the bottom.
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