New home sales fell in July for the second straight month and hit the slowest pace since March as the housing market struggles to gain momentum.
Sales dropped 2.4 percent last month to a seasonally adjusted annual rate of 412,000, down from an upwardly revised 422,000 in June, the Commerce Department said Monday.
{mosads}Still, sales are 12.3 percent above the July 2013 estimate of 367,000.
“We are somewhat surprised by this dip, considering builder confidence and new-home starts are on the rise,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Del.
“However, builders are increasing their level of inventory in anticipation that sales will gradually improve during the rest of the year.”
Sales began to strengthen a year ago, finally eclipsing 400,000 in October, but they have fluctuated since then and were hit hard by the protracted harsh winter.
The March level of 403,000 sales is the lowest level of the year and since October.
“Though new-home sales is a volatile metric that can fluctuate significantly from month to month, the economic fundamentals are in place for an ongoing housing recovery,” said NAHB chief economist David Crowe.
“Consumer confidence continues to improve, mortgage rates are at yearly lows,and the labor market is healing. These factors should help spur pent-up demand.”
The sharp drop in sales in the Northeast of 30.8 percent helped push down the July figure. Sales also were down in the Midwest (8.8%) and West (15.2%) but up 8.1 percent in the South.
The median sales price of new houses sold in July was $269,800 while inventory increased to a six-month supply.
Otherwise, the housing market has shown signs of picking up pace.
The National Association of Realtors said last week that the sales of existing homes increased 2.4 percent in July.
Meanwhile. housing construction picked up 15.7 percent last month and building permits were on the rise, another good sign for growth during the second half of the year.
In addition, mortgage rates have ticked down and prices have stabilized, making housing more affordable.
More jobs and wage growth is needed for a more robust housing recovery, economists have said.