New home sales tumble to record low in July

New single-family home sales unexpectedly fell in July to set their slowest pace on record while prices were the lowest in more than 6-1/2 years, government data showed on Wednesday.

The Commerce Department said sales dropped 12.4 percent to a 276,000 unit annual rate, the lowest since the series started in 1963, from a downwardly revised 315,000 units in June.

Analysts polled by Reuters had forecast new home sales unchanged at a 330,000 unit pace last month.

"What we are seeing is the downside of government intervention. It had fanned expectations of a market bottom when in fact, it created a false bottom," said Tom Porcelli, a senior economist at RBC Capital Markets in New York.

"We expect home sales to stay at this remarkably low range with remarkably high unemployment. There is also little demand for lending."

U.S. stock indexes initially fell on the report before recovering losses. U.S. Treasury debt prices added to gains, while U.S. dollar erased gains against the yen.

The housing market has wobbled following the end of a popular home tax credit in April, which had boosted sales and construction. The sector was at the center of the longest and deepest recession since Great Depression and its continued weakness is holding back the broader economic recovery.

Data on Tuesday showed sales of previously owned homes dropped in July to their slowest pace in 15 years. While the end of the tax credit is distorting the housing data, a 9.5 percent unemployment rate is also worsening the situation.

The weak sales pace last month resulted in the supply of new homes available for sale spiking to 9.1 months' worth from 8.0 months' worth in June.

The number of new homes on the market was unchanged at 210,000 units. The median sale price for a new home fell last month from June to $204,000, the lowest since December 2003.

Separately, demand for home loans was moderate last week despite very low mortgage rates.

Mortgage purchase and refinancing applications rose by less than 1.0 percent in the first week of August, even as 30-year loan rates fell to 4.57 percent -- the lowest in 20 years -- the Mortgage Bankers Association said.

[Source: Reuters, Washington, 25Aug10]

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