The Commerce Department said on Monday sales jumped 23.6
percent to a 330,000 unit annual rate from a downwardly revised 267,000 units
in May. The sales pace last month was still the second lowest since records
started in 1963. The percentage increase was the largest increase since May
1980, and partially unwound the prior month's historic 36.7 percent decline.
Analysts polled by Reuters had forecast new home sales
rising to a 320,000 unit pace last month from May's previously reported 300,000
units.
"Right now we're running about 60 percent below the
average annualized rate for the last decade, so there's a lot of potential out
there for improvement," said Michael O'Rourke, chief market strategist at
BTIG LLC in New York.
"It seems like sales are bottoming, so its just a
matter of that foreclosure inventory clearing up. After that, then we can start
seeing some upside. I expect that to happen later this year, maybe next
year."
US government debt prices dipped on the home sales data,
while US stocks added to gains. The US dollar pared losses against the yen.
Recent data have suggested the economy's recovery from
its longest and deepest recession since the 1930s moderated somewhat in the
second quarter. Economists expect weak housing activity to act as a drag on
growth for much of the year.
The government is expected to report on Friday that gross
domestic product growth slowed to a 2.5 percent annual rate in the April-June
period from a 2.7 percent pace in the first three months of the year.
The Commerce report suggested the housing market may be
close to working through the distortions following the end of a popular home-buyer
tax credit in April, an incentive that brought forward sales. Data last week
showed home construction fell to an eight-month low in June, while sales of
existing home sales were the lowest in three months.
Analysts, however, believe a drop in home building is
unlikely to ignite a new recession since housing is a much smaller share of the
economy now than it was at the top of the housing boom.
The impact of a 10 percent drop in home construction has
about one-third the impact now as it did in 2006, according to economists at
Bank of America-Merrill Lynch.
Last month's surge in sales saw the supply of new homes
available for sale dropping to 7.6 months' worth from 9.6 months' worth in May.
The number of new homes on the market dropped 1.4 percent
to 210,000 units, the lowest level since September 1968. The median sale price
for a new home fell 1.4 percent last month to $213,400. In the 12 months to
June, prices dipped 0.6 percent.
Underscoring the pullback in growth, a measure of
national economic activity fell in June for the first time since February. The
Chicago Federal Reserve Bank said its national activity index fell to minus
0.63 from a positive 0.31 in May.
A reading above zero indicates the economy is growing
above trend. However, the three-month moving average indicates growth has
returned very close to its historical trend, and suggests subdued inflationary
pressure for the coming year, the Chicago Fed said.
