By Lucia Mutikani
WASHINGTON (Reuters) - Sales of new U.S. single-family homes tumbled to a 14-month low in June and sales in the prior month were weaker than initially estimated, suggesting that expensive building materials and the resulting surge in prices for properties were restraining the housing market.
New home sales fell 6.6% to a seasonally adjusted annual rate of 676,000 units last month, the lowest level since April 2020, the Commerce Department said on Monday. May's sales pace was revised down to 724,000 units from the previously reported 769,000 units. Sales have now dropped for three straight months.
Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, increasing 3% to rate of 800,000 units in June.
"Until builder costs and supply-chain problems become less of an impediment, it is hard to see new sales picking up significantly in the near term," said David Berson, chief economist at Nationwide in Columbus, Ohio.
The report followed in the wake of news last week that building permits fell to a nine-month low in June, while sales of previously owned homes rebounded moderately. The COVID-19 pandemic, which forced millions of Americans to work from home and take online classes, led to a boom in housing demand.
But supply has lagged behind, with builders constrained by expensive lumber as well as shortages of other building materials, household appliances, land and labor. The backlog of single-family homes approved for construction but yet to be started surged in June to the highest level since October 2006.
U.S. financial markets were little moved by the data.
Graphic: New home sales: https://graphics.reuters.com/USA-STOCKS/byvrjokmyve/newhomesales.png
The housing market was one of the economy's star performers during the pandemic, posting double-digit growth for three straight quarters. That streak likely came to an end in the second quarter, with residential investment believed to have had a neutral impact on gross domestic product.
The government is scheduled to publish its snapshot of second-quarter GDP on Thursday.
Last month, new home sales dropped in the populous South, the Northeast and West. They rose in the Midwest. New home sales are drawn from a sample of houses selected from building permits and tend to be volatile on a month-to-month basis.
Sales declined 19.4% on a year-on-year basis in June. That was the first annual decrease since the pandemic.
The median new house price increased 6.1% from a year earlier to $361,800 in June. Sales were concentrated in the $200,000-$749,000 price range. Sales below the $200,000 price bracket, the sought-after segment of the market, accounted for only 2% of transactions last month.
There were 353,000 new homes on the market, up from 330,000 in May. At June's sales pace it would take 6.3 months to clear the supply of houses on the market, up from 5.5 months in May.
About 77% of homes sold last month were either under construction or yet to be built.