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New Home Sales Surge in June as Prices Fall

The price of a new single-family dropped to its lowest level in seven months in June as sales surged to a five-year high, the ""Census Bureau and HUD"":http://www.census.gov/construction/nrs/pdf/newressales_201306.pdf reported Wednesday.

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The seasonally adjusted annual rate of sales welled 8.3 percent in June to 497,000. Economists surveyed by Bloomberg expected June sales to increase to 484,000 from May's originally reported 476,000. May sales were revised down to 459,000.

The median price of a new home, according to the Census/HUD report, fell 5.0 percent in June to $249,700, the third time the median price has dropped in the last four months. May's median price was revised down to $262,800 from the originally reported $263,900.

While the inventory of new homes for sale rose to 161,000 in June--the highest level since September 2011--from 159,000 in May, the months' supply fell to 3.9 from 4.2 in May, matching January for the lowest supply since October 2004.

The Census/HUD homes sales report continued to show a decided shift to lower-priced homes; 33 percent of homes sold in June were priced less than $200,000, up slightly from 26 percent in May and 24 percent in April. At the other end of the range, 15 percent of home sold in June were priced at $400,000 or higher compared to 16 percent in May and 24 percent in April.

The average price of a new home slipped $12,400 in June after falling $29,400 in May, which was the largest month-over-month decline since August 2008, when the average price fell $36,400. The average price has also dropped in three of the last four months.

Despite the monthly decline, June’s median price was up 7.4 percent over June 2012. The average price in June was 8.5 percent higher than June 2012.

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With the report of June sales, the Census Bureau and HUD also revised sales figures back to March, turning the originally reported month-over-month increase to a decline. With the revision, new home sales have increased for three straight months for the first time since July-September last year. June sales were up 38.1 percent over a year ago, the strongest annual gain since January 1992, when sales were 68.6 percent higher than the recession month of January 1991.

The June increase came in the same month in which the Housing Market Index, the monthly confidence survey conducted by the National Association of Home Builders, rose seven points to 51--the first positive (above 50) reading since April 2006. The index rose another six points in July. The increase in the index in the last two months has been led by an increase in the six-month outlook for new home sales and an improvement in buyer traffic.

The surge in sales may also be a response to increasing interest rates as buyers seek to lock in lower rates.

The new home sales report tracks contracts for sale, not closings, and as such is comparable to the Pending Home Sales Index (PHSI) compiled by the National Association of Realtors (NAR). The NAR will release its June PHSI on July 29.

The Census/HUD sales report suggested continuing inventory tightening. Builders in June, according to a separate Census/HUD report, completed new single-family homes at an annual rate of 554,000, just 57,000 more than the sales rate--the narrowest margin since January 2012.

Regionally, June sales improved on a monthly basis in three of the four Census regions, falling only in the Midwest, where the sales rate dropped 11.8 percent to 67,000 from 76,000 in May but was 36.7 percent ahead of June 2012.

In the Northeast, the sales rate was up 18.5 percent to 32,000 and up 100 percent over last year. The sales pace in the West rose 13.8 percent in June to 124,000 from 109,000 May and was 14.8 percent above June 2012. In the South, the sales rate in June was 274,000, up 10.9 percent from 247,000 in May and 36.5 percent over June 2012.

_Hear Mark Lieberman every Friday on P.O.T.U.S. Radio, Sirius-XM 124, at 6:20 a.m. Eastern._