POSTED: Wednesday, July 25, 2012 - 11:30am
UPDATED: Wednesday, July 25, 2012 - 11:34am
NEW YORK (CNNMoney) — New-home sales flopped in June, an indication that the slow housing market recovery is not gaining much strength.
Sales of new houses fell 8.4% last month to an annual pace of 350,000, a 8.4% decline compared with a month earlier, according to the Census Bureau report issued Wednesday.
The modest sales pace is a far cry from the boom years, when the annual rate reached the 1.4 million mark in July 2005.
The June performance fell well short of expectations. A consensus of housing market analysts, as measured by Briefing.com, had projected a sales rate of 373,000.
The report was bad news for the overall economy. A recovery in home construction would cut into the nation's high unemployment rate, currently at 8.2%.
For every new home built about three jobs are created, according to David Crowe, chief economist for the National Association of Home Builders.
Many of those jobs go to some of the workers hardest hit by the nation's current economic malaise. About half are on construction sites. The others go to the makers of building materials, appliances, furniture and other home products, plus the truckers who take them to the site.
Confidence among builders had been up lately. They've been applying for more new permits to build more new homes, rising at double-digit percentage rates in June compared with a year earlier.
A sales slowdown could cause them to lose some of that fragile confidence.
According to Pat Newport, an analyst for IHS Global Insight, the report was not as bad as it looked at first blush.
"The headline number was down, but it could be revised upward next month," he said.
Indeed, the May report -- when it first broke in late June -- showed a sales rate of 369,000. But that was revised upward in Wednesday's release to 382,000.
And the overall trend is still positive. Even June's disappointing figures were 16% higher than June 2011.
Newport prefers long-term sales trends rather than month-over-month changes, which can get quite bumpy.
"I look at three-month moving averages and they have been up," said Newport.
Other good signs, according to Crowe, include a tight supply of new homes for sale -- just 4.9 months at the current rate of sales.
"Existing home inventory is low, particularly at the affordable level, where investors are competing with first-time homebuyers," he said. "Phoenix is a good example. There's a dearth of existing homes there and new construction is doing well."
He added that prices were fairly strong, aided by a mix of buyers that tilted toward the higher-income families.
The median new home sold in June went for $232,600.