New home sales fall for July
WASHINGTON - Americans cut back sharply in July on their purchases of new houses, a sign that higher mortgage rates might be weighing on the residential real estate recovery.
The U.S. Commerce Department said Friday sales of new houses nationwide dropped 13.4 percent to a seasonally adjusted annual rate of 394,000. That's the lowest pace in nine months and down from a rate of 455,000 in June that was revised sharply lower from a previously reported 497,000.
Sales of new homes rose 7 percent in the 12 months ending in July. The annual pace remains well below the 700,000 considered consistent with a healthy market.
This year, housing has been one of the strongest performers in an otherwise sluggish economy, helped by steady job gains and low mortgage rates. But the rates have risen a full percentage point since May and have started to steal some of the market's momentum.
"The spike in mortgage rates is slowing the pace of improvement," Dan Greenhaus, chief global strategist for BTIG, an institutional brokerage, said in an e-mail. "Given the speed at which housing was improving, and the growing talk of a renewed bubble, some moderation, assuming it doesn't materially worsen, is not a terrible outcome."
Most economists say they expect the housing recovery will persist. Mortgage rates remain relatively low by historic standards.
The average rate on a 30-year mortgage this week was 4.58 percent, according to Freddie Mac.