New-Home Sales Decline by 3% in June

WASHINGTON â€”  Sales of new homes fell in June for the first time in four months, and the government also lowered figures for May, providing further evidence that the highflying housing market is losing altitude.

The Commerce Department reported Thursday that new-home sales dropped by 3% last month to a seasonally adjusted annual sales pace of 1.131 million units. It was the first decline since February, when sales fell 11.5%.

The government also marked down sales activity in May to a pace of 1.166 million units, substantially below its initial estimate of 1.234 million units.

Analysts pointed to the June and May results as fresh evidence that housing was slowing considerably as the result of higher mortgage rates.

Sales of new and existing homes set records for five consecutive years as the housing industry enjoyed a boom powered by the lowest mortgage rates in four decades.

But rates have risen as the Federal Reserve has tightened credit conditions in hopes of slowing the economy and keeping inflation in check.

Mortgage rates retreated slightly this week. The rate on 30-year fixed-rate mortgages fell to a nationwide average of 6.72%, down from a four-year high of 6.80% last week but still a percentage point above where rates were at this time last year.

The drop in rates this week was credited to Fed Chairman Ben S. Bernanke, whose comments before members of Congress last week were interpreted by the markets as signaling that the central bank’s two-year string of rate increases could be ending.

The government reported that the median price of a new home was $321,300 in June. That was 2.3% higher than a year ago but 1.5% lower than in May.

Analysts said the drop in new-home sales was consistent with the slowdown shown this week in sales of existing homes, which fell for the eighth time in the last 10 months.

“The housing market peaked a year ago and has been slowly deflating ever since,� said Mark Zandi, chief economist at Moody’s Economy.com. “We can expect another year of lower sales, with price declines in some parts of the country.�

The decline in home sales, which followed a 0.5% increase in May, left the number of unsold homes at a record 566,000.

At the June sales pace, it would take 6.1 months to sell the backlog of homes, up sharply from the 4.3-month supply of unsold homes a year ago when the housing market was booming.

In June, sales were weak in every section of the country except the West, which posted an 8.2% increase after a decline of 7.3% in May. Sales fell 11.3% in the Northeast and were down 7.9% in the Midwest and 6% in the South.

In other economic news:

* Orders to factories for big-ticket durable goods jumped by a stronger-than-expected 3.1% in June, helped by a rebound in demand for commercial aircraft. Analysts said business investment would help bolster manufacturing production in coming months as demand by consumers slows.

* The number of people filing claims for unemployment benefits last week fell by 7,000 to 298,000, indicating continued strength in the labor market even though job growth has slowed in recent months.