By Christopher Rugaber
AP Economics Writer
WASHINGTON (AP) — U.S. new home sales rose at a modest pace in June but remained below sales levels earlier this year, suggesting low mortgage rates and a healthy job market aren’t encouraging many more purchases.
The Commerce Department reported Wednesday that new home sales increased 7% to a seasonally adjusted annual rate of 646,000. That is up from 604,000 in May but below April’s figure of 658,000.
Through the first half of the year, purchases of new homes have increased just 2.2% compared with the same period last year.
The small increase, along with a drop in existing home sales in June, suggests the housing market is still struggling to accelerate after slowing sharply last year. Rising prices for existing homes are outpacing wage growth and leaving many would-be buyers on the sidelines.
Sales of new homes soared more than 50% in the West, partially recovering after a sharp drop in May. They plunged 26.3% in the Midwest, where they have fallen nearly 18% compared with a year ago. Sales slipped 4.2% in the Northeast in June and barely ticked up by 0.3% in the South.
Prices for new homes have been more restrained than for existing ones. The median price for a new home was $310,400 in June, little changed from a year earlier. Median existing home prices rose 4.3% in June from a year ago, faster than the growth in average hourly pay.
Existing home sales, however, tumbled 1.7% in June, with rising prices and a scarce supply locking out many Americans from ownership.
The National Association of Realtors reported Tuesday that homes were sold last month at a seasonally adjusted annualized rate of 5.27 million units. Sales have shriveled 2.2% over the past 12 months.
But home prices have been climbing faster than incomes for the past seven years. This persistent gap has left many renters unable to afford ownership and prevented existing owners from upgrading to pricier properties. There has also been a supply shortage: Sales listings were flat over the past year at 1.93 million units.
“Sales have struggled to achieve meaningful, consistent growth this year, despite friendly market conditions,” said Matthew Speakman, an economist at the real estate company Zillow. “Meager inventory levels, especially in the entry-level segment, and still-rising prices continue to limit the selection of homes available to more budget-conscious buyers.”
The median sales price of existing homes climbed 4.3% from a year ago to $285,700, outpacing wage growth that has averaged roughly 3%.
In June, sales fell in the South and West. But increases in home buying in the Northeast and Midwest were insufficient to offset the decline.
There has been a persistent lack of homes on the market priced below $250,000, a level close to the median national price. But over the past year in the more expensive Northeast and West markets, sales of homes priced at more than $750,000 have fallen — a sign that home values are too high relative to people’s incomes.
There was an increase in the proportion of first-time buyers in June to 35%, up from 32% in May. But home ownership rates for Americans today between the ages of 25 to 34 are lower than preceding generations, according to Census Bureau data.
Homes that are listed are selling quickly — with a contract being signed in just 27 days.