Buoyed by a sound economy and favorable financing, consumers boosted sales of new homes in June by 6.1 percent, the biggest gain in seven months.
“The housing market is extremely strong,” said economist David Berson of Fannie Mae, formerly known as the Federal National Mortgage Association. “It’s being pushed by an almost ideal combination of economic and job growth and low mortgage rates.”
Interest rates continued to fall in the bond market, dipping to 6.32 percent. The long-bond yield hasn’t finished a day that low since February 1996. Interest rates and prices move in opposition directions.
Sales of new homes totaled 819,000 at a seasonally adjusted annual rate, up from a sharply revised 772,000 in May, the Commerce Department reported Wednesday. The May rate initially was estimated to be 825,000.
The June increase, which was stronger than expected, was the steepest since sales jumped 11.6 percent in October 1996. The rate was the highest since 825,000 in March.
The March and April rates also were revised down, to 825,000 from 838,000 and to 764,000 from 770,000, respectively. New home sales figures often are subject to major revisions because initial estimates are based on smaller samples than final surveys.
Still, sales in June remained above 700,000 for the 18th consecutive month, the longest such stretch since October 1976-September 1979. Analysts expect the market to level off soon but to remain strong.
“We won’t see sales continue at this pace because we will run out of people,” Berson said. “I think we may see … sales start to slow some, from exceptional to just very good. But if they remain over 750,000, I would say they still are very good.”
Although the economy has slowed from its robust January-March pace, it continues to create jobs and boost incomes.
And 30-year, fixed-rate mortgages have been falling for three months. They averaged 7.69 percent in June, down from 7.94 percent in May and 8.32 percent a year ago, and are averaging 7.46 percent so far this month.
Sales of new homes for the first half of the year were 8.1 percent above the first six months of last year. For all of 1996, sales totaled 757,000, the most since 817,000 in 1978.
Still, “builders are being very cautious,” Berson noted. “They are not building in advance. They’re waiting for contracts to be signed.”
The seasonally adjusted estimate of new homes for sale at the end of June was 282,000, lowest since 278,000 in July 1993. It represented a supply of 4.2 months at the current sales rate, smallest since a 4.1 month supply in July 1971.
The June inventory marked the sixth straight month of fewer than five months’ supply, the longest period since September 1970-August 1971.
The median price of a new home was $142,900, up from $140,000 in both May 1997 and June 1996.
Regionally, sales shot up 12.4 percent in the West to a 226,000 annual rate. They rose 9.2 percent in the South to 369,000 and 7 percent in the Midwest to 153,000.
But sales plunged 21.1 percent in the Northeast to 71,000, lowest since 69,000 last October when sales dropped 25.8 percent.
Still, economist David Orr of First Union Corp. noted that Northeast sales in the first six months of the year were up 50 percent from 1996 and said the decline was “probably just monthly volatility.”
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