A spike in single-family home sales in the West helped propel purchases to a second consecutive monthly increase in June, the Commerce Department reported Wednesday, but the overall increase fell short of economists’ expectations, suggesting the market may be having trouble gaining traction.
Home sales in the West were near a 10-year high, up more than 12%. Sales were up 10% in the Midwest but down 6.1% in the South, and no change was reported in the Northeast.
Overall new home sales were up 0.8% to a seasonally adjusted annual rate of 610,000 units. Economists had forecast a rate of 614,000 units.
The slower pace of housing sales is attributed more to supply problems than demand as the labor market is nearing full employment after years of sluggish growth. The cost of lumber and the scarcity of land are keeping the pace of housing starts around 1.22 million, below its historical average of 1.5 million. Economists say, if that figure could be achieved, it would erase the housing shortage.
Michael Kelczewski, a realtor with Brandywine Fine Properties Sotheby's International Realty of Wilmington, Delaware, was heartened by the report. “Locally, after the midsummer lull,” he said, “a large wave of activity developed. Within the next few weeks the school season begins; the residential market traditionally declines. If observations affirm the trajectory, 2017 is going to be a record year.”
John Engle, president of Illinois-based Almington Capital, put a different spin on the report.
"A healthy housing market is vital to a thriving economy," said Engle. "It is good to see an uptick in new home sales off the back of strong economic indicators. However, this modest improvement does not conceal the broader trend toward a softening market. New home sales remain well below their historic high, and economic forces look set to keep sales growth limited."
Rachel Ivers, a salesperson with The Blake Team at Keller Williams and a student at the University of Colorado Boulder, said, “If homebuilders built homes within the ideal price point that first-time home buyers are purchasing in – between $200,000 and $300,000 – this increase would be far more substantial.”
Brian Davis, real estate investor and co-founder of SparkRental.com, observed that while new home sales increased in June, sales for the preceding three months were revised downward. “The lack of supply, particularly of starter homes, is preventing home sales from reaching their potential.”
As for the disparity in home sales by region, Davis said, “It’s a vivid reminder that not all housing markets in the U.S. are created equally.”
Allison Bethell, real estate investor analyst for New York-based Fit Small Business, noted the advantage of new homes over previously owned ones.
“Buyers that are purchasing new homes, especially millennials and first-time home buyers, are purchasing new construction because of its amenities, upgrades and attention to progressive living,” she said, “including smart homes with integrated Wi-Fi, sound systems, light and temperature controls. Besides looking for the tech features that new homes provide, they are still focused on more sustainable, less toxic living with energy efficient windows and appliances and community gardens.”
After the report was announced, share prices declined for homebuilders D.R. Horton (DHI, Financial), Lennar Corp. (LEN, Financial) and PulteGroup (PHM, Financial), Reuters reported.
