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Glut of unsold new homes hits record high Original Source Link: (May no longer be active)
http://www.breitbart.com/news/2006/07/27/060727164635.phgh289u.htmlhttp://www.breitbart.com/news/2006/07/27/060727164635.phgh289u.html
Glut of unsold new homes across US hits record high
Jul 27 12:46 PM US/Eastern
The glut of brand new unsold homes for sale across the United States hit a record high in June, a government report showed, as some economists warned of a worsening market in coming months.
The latest data appeared to confirm a cooling trend in the housing market, following a boom and sky-rocketing prices of recent years that have priced many hopeful new home owners out of the market. In recent months, a steady rise in interest rates hikes has prompted a downturn in home buying.
Sales of new US homes declined three percent in June to a weaker-than-anticipated annualized rate of 1.131 million units, the Commerce Department said Thursday.
The drop in new home sales was steeper that most market-watchers had expected. Wall Street economists had only predicted sales to decline to 1.164 million units.
Analysts also zeroed in on the inventory of unsold new homes which leapt to a record high last month.
The government said the inventory of unsold new homes on the market rose 0.7 percent in June to a record 566,000, representing a 6.1-month supply of brand new homes at the June sales pace.
Most of the unsold new homes are located in the south of the country, the report showed.
Apart from a slight one month drop in the inventory in May, the stock of unsold new homes on the market has risen steady over the last 12 months.
"Many individuals, who signed a (purchase) contract in what they had believed was a booming housing market, may now be backing out of those contracts," said Phillip Neuhart, an analyst at Wachovia Securities.
"Thus, the new home market is likely weaker than new home sales reflects. We expect both existing and new home sales to continue their slide throughout
this year and the next," Neuhart said.
Some analysts are calling for a bursting of what they see as a property bubble and the report could exert fresh pressure on the Federal Reserve to pause its cycle of rate hikes.
The home sales market has been one of the key pillars propping up the world's largest economy, and while inflation is rising, the Fed will not want to jack up interest rates too much and risk a property market crash.
New homes sales across the United States have now fallen 11.1 percent compared to June 2005, and as the federal funds interest rate has risen to 5.25 percent.
"This was a weak report," observed Patrick Newport, an economist at Global Insight.
"Our view remains that sales will continue to slow over the course of this year and into next, because higher interest rates and rising home prices have reduced demand by raising the price of housing," he said.
Aside from rising interest rates, American homeowners have also been buffetted by rising energy prices as the economy shows signs of cooling.
The government also issued a sharp downward revision for its May figures, to show new home sales of 1.166 million rather than 1.234 million initially estimated.
The median price of a new US home meanwhile dropped 1.6 percent in June to 231,300 dollars from the prior month.
On Wednesday, a separate report from the National Association of Realtors showed existing home sales fell 1.3 percent.
Copyright AFP 2005
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