july new home sales
Mark Elias/Bloomberg via Getty Images
By Lucia Mutikani

WASHINGTON -- Sales of new U.S. single-family homes fell for a second straight month in July, but a surge in the stock of properties on the market and a moderation in price increases should help to stimulate demand in the months ahead.

Other data Monday showed activity in the vast services sectors slowed again in August. The reports, however, did little to change views the economy is on a strong growth path, against the backdrop of relatively strong job growth and manufacturing activity.

New home sales slipped 2.4 percent to a seasonally adjusted annual rate of 412,000 units, the lowest level since March, the Commerce Department said. Economists polled by Reuters had forecast new home sales at a 430,000-unit pace last month.

The weak new home sales pace is at odds with other data that have suggested the housing market recovery is back on track. New house sales data, however, is volatile month-to-month because of a small sample.

Data last week showed a jump in new home construction in July. Home resales also rose to a 10-month high in July.

Compared to July last year, new home sales increased 12.3 percent.

In a separate report, financial data firm Markit said its preliminary services Purchasing Managers Index slipped to 58.5 this month from 60.8 in July.

A reading above 50 signals expansion in the services sector. Despite the slight cooling in activity, businesses were upbeat about prospects in the year ahead.

That fits in with expectations of sturdy economic growth in the second half of 2014 and through early next year.

U.S. financial markets shrugged off the weak data. The S&P 500 (^GPSC) vaulted to a record high, crossing the 2,000 threshold for the first time. The dollar was up against the euro.

The housing index rose marginally. Homebuilder D.R. Horton (DHI) fell, while PulteGroup (PHM) rose modestly.

A run-up in mortgage rates, as well as a shortage of homes on the market, weighed on housing in the second half of 2013. But housing inventory is picking up and home price appreciation is slowing.

The inventory of new houses on the market increased 4.1 percent to 205,000 units, the highest since August 2010. With supply increasing, the median home price increased only 2.9 percent from a year ago.

At July's sales pace it would take 6 months to clear the supply of houses on the market. That was the highest since October 2011 and compared to 5.6 months in June.

Six months' supply is normally considered a healthy balance between supply and demand.

Last month, new home sales jumped 8.1 percent in the South, but fell in the Northeast, West and Midwest.

-With additional reporting by Ryan Vlastelica in New York.

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High property taxes and no jobs for the average person this housing market is ripe for a plunge. The sooner they raise the rates the sooner the plunge.

August 26 2014 at 12:14 AM Report abuse rate up rate down Reply

The demand for housing is great but the people are broke. It's all about Wall Street too bad they forgot the rest of America in their calculations.

The rich sit in their mansions wondering when the rest of us will join. Figure it out.

August 25 2014 at 11:43 PM Report abuse rate up rate down Reply

People are finally starting to figure it out.... I have the money to pay cash for a nice home in the suburbs, but I choose to live with my mother in law instead. I worked as a carpenter in my teens and early 20's for a home builder (my great uncle), and we used to stick build homes that will last 100 years if no major weather related ordeal happens. But, these $300,000 homes that come in on trucks with sections of walls already pre-made are crap. We used to make sure every board was secured, but these stapled together wall sections are flimsy.. and what that means is when you get a little wiggle, you will get cracks in your drywall and in time the siding will begin to fall off. Windows will develop air leaks and bugs will get in a lot easier. The joints will fall apart in 20 to 30 years too.

In the end, I would buy an old farm house with lath and mortar walls where the wood swells and shrinks with the temperature before I bought these cost cutting McMansions. Those old houses can stand up to hurricane winds while modern houses can't even handle light breezes.

Now for the economic aspect... Millennials aren't playing the same social games that boomers played where they are insecure and always trying to show off wealth by taking on huge debt.. Millennials want to be what the Boomers pretended to be... So, they are living with relatives, staying in 400 square foot houses, or taking on 5 room mates in a 1 bedroom apartment, and my favorite; living in RVs and campers. There is also groups of friends that will go down into the ghetto and each buy up a house on the same block. So, inner city crap holes get turned into dorky renaissance tight jean wearing hipster neighborhoods with community gardens. All forms of intelligent housing options spell bad news to the parasites that live off of Urban Sprawl eating up the last of the natural world with new home construction.

It is pretty common sense too.... You can live in debt trying to be an A-hole who wants other people to feel poor in your presence by driving around a Lexus and living in a suburb, or you can save your money, learn how to invest it, and become wealthy like those idiots pretend to be.. I must have been one of the first to go the save money and invest it strategy.. All of my friends trying to live the American Nightmare are jealous as hell and bitter on life too. They work 40 hours a week barely to cover their bills and pray for the day when the house is paid off and they get a pension to live off of, and I retired at 25 and have the money to buy a motorcycle or travel on vacation. My good buddy gets 3 weeks of vacation every year and he spends it catching up on his home repairs and other personal work or just relaxing around the house. How funny is that ?... My friend's dream vacation is getting to stay at home and not go to work for a week three times per year.

Modern society was screwed up by the boomers... The Greatest Generation should have spent more time raising them right.

August 25 2014 at 8:12 PM Report abuse -1 rate up rate down Reply
2 replies to socioeconomist1's comment

So...you claim to have retired at age 25 after building houses through your teens into your early 20's.....and you say you're an economist? You've been retired since 25 after building houses in your early 20's!!!?!?!????!

There are holes in your story dude.

August 25 2014 at 10:28 PM Report abuse +2 rate up rate down Reply

They come in sections now like building blocks with all plumbling, electrical, and other things that get connected later on. They don't just build frames anymore most of the stuff is all ready for hook up. They build the foundation first then bring the cubes or fancy Lego blocks on trucks.

August 26 2014 at 12:09 AM Report abuse rate up rate down Reply

WHO is their right mind, would go in debt when the bottom is about to fall out?

August 25 2014 at 3:19 PM Report abuse rate up rate down Reply
1 reply to Dauria's comment

Doesn't look like anyone wants to admit the bottoms falling out. Anything to keep the markets up only works so long when a lot of other people aren't working at all.

August 25 2014 at 11:50 PM Report abuse rate up rate down Reply

The greenest house is the one already constructed. There are a large number of existing houses at all prices and sizes in great neighborhoods with excellent services adjacent to good schools, transportation, supermarkets, restaurants, and other amenities. Or, one may purchase a house built on former farm-land where one must drive in order to purchase a quart of milk or a bottle of aspirin - and in areas with questionable schools and little or no public transportation. Add to this: no sidewalks, limited utility options (probably electric or oil heat) and more.

We purchased our 4,200 s.f. house built in 1890 some six years ago at a very good price. It is in a neighborhood with excellent services, accessible to both light rail and bus transportation, walking distance of two supermarkets and several restaurants. After a few basic renovations to the heating system, some basic tightening up and replacement of a very few garbage vinyl windows, our entire energy bill (heat, hot water, cooking, drying clothes, electricity, air-conditioning) is less than $3,600 per year. When we retire, we will be comfortable with only one vehicle, able to walk for most groceries, take a train into the city for a movie, dinner, play, whatever and much more. We are good friends with our neighbors well beyond next door and across the street... We cannot imagine buying a 'new' house in a cookie-cutter development where we barely know anyone.

August 25 2014 at 11:15 AM Report abuse rate up rate down Reply
1 reply to pfjw's comment

Most neighborhoods are built on former farmland.

August 26 2014 at 3:14 PM Report abuse rate up rate down Reply