New home sales drop in June but up for the year

New home sales dropped off in June after two months of solid gains but the market is still holding its own amid a weakening economy. 

Sales fell 8.4 percent last month to a seasonally adjusted annual rate of 350,000, the biggest drop since February 2011 after hitting a two-year high pace in May, the Commerce Department reported Wednesday.

"The lower number of new-home sales in June represents an adjustment from a robust level of activity in May, yet overall results for the second quarter show we are still on track for continued improvement,” said David Crowe, chief economist for the National Association of Home Builders (NAHB). 

“That said, the very tight inventory of new homes for sale at this time poses a challenge to builders, who’d like to have a larger selection for buyers to choose from but continue to confront issues with obtaining credit to build viable new projects."

Meanwhile, the inventory of new homes for sale was virtually unchanged for the month at 144,000, which represents a 4.9-month supply and is the lowest on record in nearly 50 years. A healthy market would have a six-month supply. 

June's sales are 15.1 percent higher than the same month last year but are still below the 700,000 that would reflect a healthy market.

New home sales took the biggest hit in the Northeast, falling 60 percent last month while dropping 8.6 percent in the South. 

Sales were up 14.6 percent in the Midwest and 2.1 percent in the West.

"Sales numbers are up on both a quarterly and yearly basis, while builders continue to report that they are seeing more serious buyers in the market for a newly constructed home with all of the latest updates,” said Barry Rutenberg, NAHB's chairman and a home builder from Gainesville, Fla.

The housing market has remained a bright spot in the economic recovery, which has slowed again this summer over continued concerns over the financial struggles in Europe and slow job creation in the United States. 

There are several factors weighing in favor of the housing market, including record-low mortgage rates and rising prices. 

Still, the median price of new houses sold in June was $232,600, down 1.9 percent from May. 

A separate report on Tuesday showed that home prices rose 0.8 percent on a seasonally adjusted basis from April to May, according to the Federal Housing Finance Agency’s monthly index.