WASHINGTON — New-home buying dropped in July to a record low as inventories increased, another signal that the housing market could continue struggling without support from the government's first-time home buyer's tax credit.
Sales decreased 12.4% from the previous month to a seasonally adjusted annual rate of 276,000, the Commerce Department said Wednesday. That was the lowest level of sales on record going back to 1963.
The steep decline reverses a pickup in sales registered in June. Sales that month were revised down, rising 12.1% to 315,000. They were originally reported up 23.6% at 330,000.
Economists surveyed by Dow Jones Newswires had estimated sales would climb in July by 0.9% to 333,000.
Inventories remained high in July, with the month's supply reaching 9.1. The supply in June was revised to 8.0, from 7.6. The data Wednesday showed inventories of new homes were flat compared to June, when an estimated 210,000 homes were up for sale.
The sour housing data comes after buyers hurried to the market before the tax credit ended April 30, causing sales to soar in the spring. Many buyers were rushing to close contracts by an initial deadline of June 30, but that has been extended until the end of September.
Meanwhile, housing data released by the National Association of Realtors on Tuesday showed existing home sales plunged to a record 27.2% — nearly twice as much as analysts had expected — to an annual rate of 3.83 million in July. Inventories for home resales are at their highest level in more than a decade, which adds more pressure to already depressed home prices.
Joblessness in the U.S. continues to restrain big purchases, despite low mortgage rates. As indicated, prices could fall more if the supply of unsold homes keeps rising.
A steady decline in prices can hurt sales. Would-be buyers will wait for a better deal and some owners will keep their property off the market until prices rise.
The median price for a new home declined year over year by 4.8%, to $204,000 from $214,200 in July 2009. This is the lowest level since December 2003.
Year over year, sales in July were down 32.4%.
Regionally, new-home sales declined across all regions; 8.3% in the Midwest, 8.7% in the South and 13.9% in the Northeast.
Sales fell 25.4% to a record low in the West.
The Commerce Department report on new-home sales can be found at: http://www.census.gov/const/newressales.pdf