By Lucia Mutikani
WASHINGTON (Reuters) – Sales of new U.S. single-family homes rebounded sharply in June, but sales for the prior three months were revised down, indicating that the housing market continued to tread water despite lower mortgage rates and a strong labour market.
Other data on Wednesday showed manufacturing activity slowing to a near 10-year low in early July. Weak housing and manufacturing are offsetting strong consumer spending, holding back the economy.
Concerns about slowing growth, especially tied to trade tensions between the United States and China, as well as weakness in overseas economies are seen encouraging the Federal Reserve to cut interest rates next Wednesday for the first time in a decade.
The Commerce Department said new home sales rebounded 7.0% to a seasonally adjusted annual rate of 646,000 units last month. May’s sales pace was revised down to 604,000 units from the previously reported 626,000 units. Data for March and April was also revised down.
Economists polled by Reuters had forecast new home sales, which account for about 11% of housing market sales, increasing 6.0% to a pace of 660,000 units in June.
New home sales are drawn from permits and tend to be volatile on a month-to-month basis. Sales increased 4.5% from a year ago. The median new house price was unchanged at $310,400 (£248,797) in June from a year ago.
Despite cheaper mortgage rates and the lowest unemployment rate in nearly 50 years supporting demand for housing, expensive materials and land and labour shortages are constraining builders’ ability to produce more affordable housing.
The housing market hit a soft patch last year and has since struggled to gain traction, with residential investment contracting for five straight quarters. A report on Tuesday showed home resales tumbled in June as tight supply pushed previously owned house prices to a record high.
While single-family homebuilding rebounded in June, permits increased moderately and continued to lag housing starts.
In a separate report on Wednesday, data firm IHS Markit said its Flash U.S. manufacturing PMI slipped to a reading of 50.0 in July, the lowest since September 2009, from 50.6 in June.
The reading is in line with the neutral 50.0 threshold, which IHS Markit said signalled stagnant manufacturing business conditions. Manufacturing, which accounts for about 12% of the U.S. economy, is being hobbled by an inventory overhang, the U.S.-China trade tensions and weak global demand.
The dollar fell against a basket of currencies, while U.S. Treasury prices rose. Stocks on Wall Street were trading lower.
The 30-year fixed mortgage rate has dropped to an average of 3.81% from a more than seven-year peak of 4.94% in November, according to data from mortgage finance agency Freddie Mac.
New home sales in the South, which accounts for the bulk of transactions, rose 0.3% in June to a 13-month high. Sales in the Midwest dropped 26.3% to their lowest level since September 2015. Sales in the West rebounded 50.4%, the biggest gain since August 2010, more than recouping May’s 38.5% plunge.
In the Northeast, sales dropped for the second straight month, hitting their lowest level in eight months.
There were 338,000 new homes on the market last month, up 0.6% from May. At June’s sales pace it would take 6.3 months to clear the supply of houses on the market, down from 6.7 months in May. About 62% of the houses sold last month were either under construction or yet to be built.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)