New-Home Sales Decline; Housing Weighs on Economy

New-Home Sales Decline; Housing Weighs on Economy

By Jeff Bater From The Wall Street Journal Online

New-home sales took their fifth fall in six months during June, while a measure of inventory rose and the median price dropped, the government said Thursday.

Meanwhile, demand for expensive goods climbed for the fourth time in five months during June, spurred by stronger demand for airplanes, the government reported Thursday.

Sales of single-family homes decreased by 6.6% to a seasonally adjusted annual rate of 834,000, the Commerce Department said Thursday. May new-home sales fell 2.2% to an annual rate to 893,000; originally, the government said May sales dropped by 1.6% to 915,000.

Demand rose 10.0% in April and declined 1.2% in March, 5.6% in February and 12.7% in January.

The median estimate of 26 economists surveyed by Dow Jones Newswires was a 1.6% decrease in June sales to a 900,000 annual rate.

Year-to-year, new-home sales were 22% lower than the level in June 2006.

The moribund housing sector has pulled down U.S. economic growth for six straight quarters, and analysts expect more of the same going forward. They think a large inventory of unsold homes will depress prices, which dilutes incentive to invest in property. A report Wednesday showed demand in June for existing homes fell a fourth straight time, tumbling to the lowest point since November 2002 amid higher mortgage rates and tightening lending standards.

Thursday's data showed the ratio of new houses for sale to houses sold climbed during June, rising to 7.8 from 7.4 in May. There were an estimated 537,000 homes for sale at the end of June, unchanged from May.

The median price of a new home fell by 2.2% to $237,900 in June, down from $243,200 in June 2006. The average price increased by 3.7% to $316,200 from $305,000 a year earlier. In May this year, the median price was $241,000 and the average was $310,800.

Regionally last month, new-home sales decreased 27.1% in the Northeast, 22.5% in the West, and 17.1% in the Midwest. Demand rose 7.6% in the South.

An estimated 77,000 homes were actually sold in June, down from 82,000 in May, based on figures not seasonally adjusted.

Durable-Goods Orders Rise

Orders for durable goods increased by 1.4% last month to a seasonally adjusted $217.07 billion, the Commerce Department said. Durables, which are goods designed to last at least three years, fell 2.3% in May, revised from a previously estimated 2.4% decrease. Orders rose 1.0% in April, 5.1% in March and 0.5% in February.

A key barometer of business equipment spending -- orders for nondefense capital goods excluding aircraft -- fell by 0.7%, after decreasing 1.5% in May. Shipments for nondefense capital goods excluding aircraft decreased in June by 0.4%, after rising 0.7% in May; the shipments are used in calculating gross domestic product, which is the barometer for economic growth in the U.S.

Wall Street expected a slightly bigger increase in orders. The median estimate of 26 economists surveyed by Dow Jones Newswires had durables 1.6% higher in June.

Demand during June for durable goods in the transportation sector increased 6.1%, after falling 7.0% in May. Orders for commercial planes surged 29%, after dropping 21% in May. Military aircraft orders increased 9.9%. Motor vehicles and parts decreased by 1.4% last month.
Demand for all durables except transportation goods decreased 0.5% in June. Orders fell by 3.6% for primary metals and 4.6% for computers and electronics. Demand rose by 1.7% for fabricated metals, 1.5% for electrical equipment, and 2.6% for machinery. Demand ex-transportation had gone 0.2% lower in May.

June capital goods orders increased by 2.7%. Nondefense capital goods -- items meant to last 10 years or longer -- rose by 4.6%.

Defense-related capital goods orders dropped 14%. Orders for everything except defense goods increased by 1.9% in June, after going 2.7% lower during May.

Durable-goods shipments of manufacturers went 1.1% lower last month. Unfilled orders, a sign of future demand, rose 1.5%. Inventories increased 0.2%.

Jobless Claims Decline

The number of U.S. workers filing new claims for jobless benefits fell in the latest week, in contrast with Wall Street expectations for a slight rise, suggesting labor markets remain robust.

Jobless claims were down 2,000 to 301,000 on a seasonally-adjusted basis in the week ended July 21, the Labor Department said Thursday. Claims for the July 14 week were revised upward slightly to 303,000 from 301,000.

Wall Street forecasts called for claims to increase by 9,000 last week to 310,000.

The four-week average -- which economists use to gauge underlying labor market trends -- fell to 308,500 last week from a previous level of 312,500.

According to the Labor Department report Thursday, continuing claims for workers drawing unemployment benefits for more than a week fell 19,000 to 2,545,000 in the week ended July 14, the latest week for which such data are available. These numbers are seasonally adjusted.

The insured unemployment rate was unchanged at 1.9% in the July 14 week, the same level as the previous week.

There were 15 states and territories reporting an increase in initial jobless claims for the July 14 week, while 38 reported a decrease.

North Carolina and Tennessee had the biggest increases, of 12,842 and 6,749 respectively, attributed to layoffs in the transportation and construction industries, among others. Michigan reported the biggest decrease, 18,269, due to fewer layoffs in the automobile industry.

-- Benton Ives-Halperin contributed to this article.