Go to the Globe and Mail homepage

Jump to main navigationJump to main content


Report on Business

Economy Lab

Delving into the forces that shape our living standards
for Globe Unlimited subscribers

Entry archive:

(Scott Olson/Scott Olson/Getty Images)
(Scott Olson/Scott Olson/Getty Images)

Economy Lab

U.S. new home prices rise, consumers perk up Add to ...

New U.S. single-family home sales unexpectedly fell in June, but a sharp rise in prices and declining supply suggested the market for new houses was starting to stabilize, a government report showed on Tuesday.

Other data showed U.S. consumers grew more confident about the future this month, even though there were still concerns about lack of jobs.

The Commerce Department said new single family homes sales slipped 1 per cent to a seasonally adjusted 312,000-unit annual rate. However, the median sales price for a new home increased 5.8 per cent last month to $235,200.

Compared to June last year, the median price rose 7.2 per cent. The rise in prices is the latest sign that home values are starting to stabilize.

"New home prices ... appear to have reached a bottom. However, that conclusion must remain tentative given the large number of distressed properties," said Steven Wood, chief economist at Insight Economics in Danville, California.

"Fortunately, with no excess ... inventory of unsold new homes, any sustained rebound in new home sales should quickly translate into firmer prices."

The Conference Board said on Tuesday its index of consumer attitudes rose to 59.5 from 57.6 in June, beating economists expectations for a reading of 56.0.

The reports were hopeful signs for the economy, which has struggled to pull out of a soft-patch.

"You got some improvement (in consumer confidence) but I think the one thing that was not very encouraging is that the present situation actually fell," said Tom Porcelli, U.S. economist at RBC Capital Markets.

"The increase was due to future expectations. It's good to be hopeful for the future but we want consumers to be more confident in the present."

Recent data ranging from employment to retail sales suggest growth might not rebound as strongly as initially anticipated, and economists warn that failure to raise the country's debt limit could push the fragile economy over the edge.

The government is expected to report on Friday that the economy grew at a 1.8 per cent annual rate, according to a Reuters survey, after a tepid 1.9 per cent pace in the first three months of the year.

The anticipated pedestrian growth pace will mostly reflect a sharp deceleration in consumer spending, which was hampered by high gasoline prices and a shortage of some popular motor vehicle models because supply disruptions from Japan.

Despite lean inventories, recovery in the market for new homes is being frustrated by a glut of previously owned homes, which are currently selling well below the cost of new construction.

There were a record low 164,000 new homes available for sale in June. That compares to about 3.77 million used homes on the market in June, plus properties that are in foreclosure.

The scarcity of new homes is encouraging builders to break ground on new projects. Data last week showed housing starts rose to a six-month high in June.

Other data on Tuesday showed single-family home prices were unchanged in May. The S&P/Case Shiller composite index of home prices in 20 metropolitan was flat on a seasonally adjusted basis after rising 0.4 per cent in May.

However, prices fell 4.5 per cent from a year-ago.

Data last week showed the median price of an existing home in June increased 0.8 per cent to $184,300 from a year ago.

At the June's sales pace, the supply of new homes on the market fell to 6.3 months' worth, the lowest since April 2010, from 6.4 months' worth in May.

Report Typo/Error

Follow us on Twitter: @GlobeBusiness


Next story




Most popular videos »

More from The Globe and Mail

Most popular