U.S. new-home sales rose slightly in June, a signal of gradual recovery in a segment of the market that continues to suffer from severe supply constraints.
Purchases of newly built single-family homes -- a narrow slice of all U.S. home sales -- increased 0.8% to a seasonally adjusted annual rate of 610,000 in June, the Commerce Department said Wednesday.
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The gain was more modest than the 1.5% growth economists had predicted.
Combined with a 1.8% slide in existing-home sales that the National Association of Realtors reported earlier this week, the latest data suggest the lack of supply kept a lid on activity in the crucial spring selling season despite strong housing demand.
"Frankly, it's not impressive," said Tian Liu, chief economist at Genworth Mortgage Insurance, of the June new-home-sales report.
New-home sales are volatile and subject to large revisions. The month's slight gain fell well within the 12.1-percentage-point margin of error.
Longer-term trends indicate the market is continuing to recover, albeit more slowly that many economists say is needed, due to a shortage of new homes.
The 12-month rolling total of new-home sales was up 14.1% year-over-year and represented the most since June 2008.
Adjusted for population growth, however, new-home sales were about 30% below the 50-year average in June, according to Ralph McLaughlin, chief economist at Trulia.
Mr. Liu said one critical reason why new-home sales aren't rebounding more quickly is that builders are focusing on higher-end construction. The median sale price for a new home sold in June was $310,800.
New-home construction has continued to lag behind the broader recovery, primarily due to labor shortages and a lack of desirable building lots. The size of the construction workforce in the U.S. declined to 10.4 million in 2015 from 10.6 million near the bottom of the market in 2010, according to an analysis of U.S. Census data by Issi Romem, chief economist at BuildZoom, a website for contractors.
That is driving a boom in home-renovation activity, which is expected to hit a record level of $316 billion this year, but may be hurting demand for new homes as buyers elect to stay put rather than pay a steep premium for a brand-new home.
At the current sales pace, there was a 5.4-month supply of new homes on the market at the end of June. There were 272,000 new homes available for sale, the highest level in eight years.
"New home building and new homes are increasingly looking like the key to breaking inventory gridlock," Mr. McLaughlin said.
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(END) Dow Jones Newswires
July 26, 2017 12:11 ET (16:11 GMT)