New home sales fall in June as sales lag behind last year

Sales of new homes fell in June, another sign of the weakness in the struggling housing market. 

Homebuyers bought 1 percent fewer new houses last month, with sales dropping to an annual rate of 312,000, the Commerce Department said Tuesday. 

In a healthy market about 700,000 new houses are sold, according to economists.

While 2010 was the worst year on record for new home sales, this year's totals through the first six months are looking worse. 

Last year was the fifth straight year that new-home sales fell, following five years of record sales as the housing market boomed nationwide. 

The Standard & Poor's/Case-Shiller home-price index showed that prices rose in 16 of the 20 cities tracked, rising for the second straight month in May, as spring buyers went house hunting. Still, 19 of the 20 cities have seen year-over-year price declines.

A high number of foreclosures, small price increases, high employment, larger down payment requirements and tight lending standards are hampering the the sector's recovery. 

New homes represent less than 20 percent of the market but have a heavy economic effect with each new home creating three jobs and $90,000 in taxes, the National Association of Home Builders has reported. 

Sales of new homes fell 15.8 percent in the Northeast and 12.7 percent in the West while sales were up 9.5 percent in the Midwest and 3.4 percent in the South.

The median price of was up to $235,200.

The number of new homes for sale at the end of June to 164,000, a record low, and a 6.3-month supply. 

Sales of existing homes fell in June for a third straight month and sales totals are lagging behind the 4.91 million homes sold in 2010, the fewest since 1997. About 6 million homes are sold each year when the economy is in good shape. 

Foreclosures are expected to increase to 1.2 million this year, a 20 percent increase, according to RealtyTrac Inc.