New-home sales slump in June as housing headwinds increase

The numbers: New-home sales were at a 631,000 annual pace in June, the Commerce Department said Wednesday.

Economists surveyed by MarketWatch had forecast a pace of 660,000.

What happened: Sales of newly-constructed homes tumbled 5.3% below a downwardly-revised May figure, and stood just 2.4% higher than a year ago. The median price of new homes sold during the month was $302,100, 4.2% lower than in June 2017.

Big picture: The government’s home-construction reports are based on small samples and are often revised heavily, making it hard to rely on any one month’s data. Revisions to prior months’ reports took sales figures for 2018 down a net 27,000 homes.

For the year to date, sales are 6.9% higher than in the same period in 2017, but many housing analysts suspect there’s little momentum left in the market.

At the current pace of sales, it would take 5.7 months to exhaust available supply, the most since last summer. Traditionally, six months was the sign of a balanced market, but sales have been running much leaner than that since the housing crisis.

Most housing industry participants want to see a stronger pace of construction so that builders can catch up to years of pent-up demand for housing, especially as inventory of previously-owned homes remains at long-time lows.

Market reaction: Builder stocks slumped after the data release, with D.R. Horton Inc. DHI, -2.91%   and PulteGroup, Inc. PHM, -4.28%   both down about 3%.

Mark Fleming, chief economist for First American, had a more nuanced view, pointing out the hefty margin of error that comes with the Commerce Department's data. He also found a silver lining in the decline in median prices. “The fact that we’re actually building and selling lower-priced homes I think is wonderful news for the housing market,” Fleming told MarketWatch.

It’s also too early to get a real read on where would-be home buyers are turning if they’re not snatching up newly constructed homes, Fleming said. “If not new, are they buying existing? Or are they just renting?” It will likely take a few more months before clear trends emerge, he said.