US new-home sales fell 1.7 per cent in July

WASHINGTON — Sales of new U.S. homes slumped 1.7 per cent in July, the second straight monthly decline as the broader housing market appears to have lost some of its momentum despite an otherwise solid economy.

The Commerce Department said Thursday that newly built homes sold at a seasonally adjusted annual rate of 627,000 last month, down from 638,000 in June and 654,000 in May. Despite the slowdown, new-home sales have risen 7.2 per cent year-to-date.

Steady hiring gains and signs of stronger economic growth have boosted demand for housing. But higher mortgage rates and a tight inventory of homes on the market has made affordability a challenge for many would-be buyers.

The Northeast suffered a steep 52.3 per cent plunge in sales, while sales in the South — the largest regional new-home market — slipped 3.3 per cent. Sales rose in the Midwest and West.

The average sales price has risen 5.8 per cent from a year ago to $394,300. This increase reflects a shift toward more expensive properties: 60 per cent of the new homes purchased in July cost more than $300,000, up from 56 per cent in 2017.

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Existing home sales have also slipped over the past four months, the National Association of Realtors said in a separate report Wednesday. Existing homes — a larger share of the real estate market than new construction — sold at an annual pace of 5.34 million in July, a decline of 0.7 per cent from June.

Buyers looking at properties worth more than $500,000 have plenty of options, and sales at that price point and above are rising, the Realtors said. But sales of homes worth less than $250,000 are flat or falling.

While hiring has been robust this year, inflation has eaten away at average wage growth, according to the Bureau of Labor Statistics.

Homebuyers also face higher borrowing costs as the interest charged on a 30-year, fixed-rate mortgage averaged 4.53 per cent last week, up from 3.89 per cent a year ago, according to mortgage buyer Freddie Mac.

Josh Boak, The Associated Press