WASHINGTON (Reuters) - Sales of new U.S. single-family homes increased more than expected in August after two straight monthly declines, but the underlying trend still pointed to a weakening housing market amid rising mortgage rates and higher home prices.
Continue Reading Below
The Commerce Department said on Wednesday new home sales rebounded 3.5 percent to a seasonally adjusted annual rate of 629,000 units last month. July's sales pace was revised down to 608,000 units from the previously reported 627,000 units.
Sales in June were also much weaker than previously reported. Economists polled by Reuters had forecast new home sales, which account for about 11 percent of housing marketsales, rising 0.5 percent to a pace of 630,000 units in August.
New home sales are drawn from permits and tend to be volatile on a month-to-month basis. They increased 12.7 percent from a year ago.
The housing market is lagging a robust economy, with data last week showing sales of previously owned homes flat in August and building permits plunging to a more than one-year low.
Economists blame the weakness in the housing market on rising borrowing costs and house prices, which have outstripped wage growth, making home purchasing unaffordable for some first-time buyers.
The 30-year fixed mortgage rate has increased more than 60 basis points this year to an average of 4.65 percent. House prices rose 5.9 percent in July from a year ago, data showed earlier this week.
In contrast, annual wage growth has been stuck below 3 percent, though it has recently shown signs of picking up. With the Federal Reserve expected to raise interest rates later on Wednesday for the third time this year, mortgage rates are likely to rise further.
Residential investment contracted in the first half of the year and is expected to decline further in the third quarter.
New home sales in the South, which accounts for the bulk of transactions, fell 1.7 percent in August. Sales jumped 9.1 percent in the West and climbed 2.7 percent in the Midwest. They soared 47.8 percent in the Northeast, which is the smallest segment of the new housing market.
The median new house price rose 1.9 percent to $320,200 in August from a year ago. There were 318,000 new homes on the market in August, the most since February 2009 and up 1.6 percent from July. Supply is, however, just over half of what it was at the peak of the housing market boom in 2006.
At August's sales pace it would take 6.1 months to clear the supply of houses on the market, down from 6.2 months in July. Nearly two-thirds of the houses sold last month were either under construction or yet to be built.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)