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Sales of new houses drop 8.4% in June

WASHINGTON (MarketWatch) -- Sales of new houses fell 8.4% in June after reaching a two-year high in May, suggesting that the slowdown in the U.S. economy might be making buyers more cautious.

Sales declined to an annual rate of 350,000 in June and median prices of new homes also fell to the lowest level since January, the Commerce Department reported Wednesday.

Economists polled by MarketWatch had forecast sales to rise to a 375,000 rate last month.

The pullback in June, however, was largely offset by a bigger increase in transactions in May than originally reported. Sales in May were revised up to an annual rate of 382,000 -- the highest level since April 2010 -- from 369,000. Sales in April were also revised higher.

Still, combined sales in June and May were slightly softer than economists expected. The decline also follows last week's disappointing report showing that sales of previously occupied homes also fell last month.

At the same time, though, there's little evidence the housing market is ready to retreat. On a year-over-year basis, for example, new home sales are actually 15.1% higher.

What's more, other industry reports indicate that home prices continue to rise, signaling an increase in demand. The home sales report is volatile and sharp revisions are common, as the new figures for May show.

"Taken at face value, this was a mixed report," Patrick Newport, an economist at IHS Global Insight, said in a note. "Still, one should never get too excited or depressed by the latest new home sales figures because they are not estimated very well."

Economists say it takes several months or longer to establish new trends. Sales over the past three months averaged 363,000, down slightly from 364,000.

Sales fell by a record 60% in the Northeast, an unusually large decline that immediately drew suspicion.

"If you believe that, contact me immediately as I am selling shares in a bridge and a Broadway musical," Joel Naroff of Naroff Economic Advisors said. He argues the number is almost certainly flawed and likely to be revised higher, so overall sales in June could turn out to be sharply higher.

Sales also dropped in the South, where the decline was 8.6%.

Home purchases rose 14.6% in the Midwest and 2.1% in the most important region for sales, the West.

The median price of new homes, meanwhile, fell by 1.9% in June to $232,600, marking the lowest level since January.

The supply of new homes on the market would last 4.9 months if they were all sold before any others were built. That was up from 4.5 months in May.