FEARS of a double-dip in the US housing market intensified yesterday after data showed that new home sales fell at the sharpest monthly pace in July since records began.
Sales of new homes plummeted 12.4 per cent to an annual rate of 276,000 – the lowest since the data was first recorded in 1963 and well below the market’s expectations of a rate of 330,000 homes. The Commerce Department also revised down June’s annual sales pace to 315,000 units.
New home sales have struggled to pick up over the past few months and the annual pace is only a quarter of what was seen in the boom years of the early 2000s.
New York-based Steven Ricchiuto at Mizuho Securities said: “It is a bad report through and through, there is nothing in the details to tell you that things are improving whatsoever. The odds of the dreaded double-dip are increasing.”
The downbeat data initially weighed on US equities but buying activity capped losses.
Analysts expect the pace of new home sales to remain depressed for some months to come and predicted possible years of excess supply.
ING’s Teunis Brosens said: “Sales may recover slightly in the coming months, as the demand fallout following the expiry of the homebuyer tax credit fades. But we expect them to remain low.”
“Homebuilders continue to face tough competition from distressed sales. These typically sell at a discount and currently make up about 30 per cent of total sales. Moreover, while the building spree peaked in 2006, the housing market is still burdened with substantial excess supply. It may take several years to clear this excess,” he warned.