By Eric Morath and Likhitha Butchireddygari 

WASHINGTON -- Americans purchased fewer new homes in May, a sign the housing sector remains on somewhat uneven footing.

Purchases of newly built single-family homes decreased 7.8% to a seasonally adjusted annual rate of 626,000 in May, the Commerce Department said Tuesday. It was the slowest pace of sales since December.

Economists surveyed by The Wall Street Journal had expected a sales pace of 683,000 homes in May.

The monthly decline was driven by an unusually large decrease in sales in the West.

"Any time new home sales are up or down sharply because of one region, there is good reason to suspect that the move is fluky," Stephen Stanley, chief economist at Amherst Pierpont Securities, wrote in a note to clients. He said strong sales of previously owned homes in May lessens any concern about the broader housing market.

Sales data can be volatile and subject to revisions. The May decrease came with a margin of error of plus or minus 14.7 percentage points. Sales in April were revised up modestly to a 679,000 pace, while March sales were revised down to 705,000.

More broadly, new-homes sales have bounced back from a slump last summer and fall but remain below the postrecession high touched in November 2017. Sales are about half what they were during the peak of the housing bubble in 2005.

New-home sales are a relatively narrow slice of all U.S. home sales -- about 90% of homes purchased in the U.S. are previously owned. Sales of previously owned homes rose in May, increasing 2.5% to a seasonally adjusted annual rate of 5.34 million, the National Association of Realtors said last week.

The two markets moved in opposite directions last month.

Mounting concerns about the global economy have pushed down borrowing costs, and that appears to be aiding the market for previously owned homes. Mortgage rates are down more than a percentage point from late last year, according to Freddie Mac. That helps make properties more affordable for buyers who finance their purchases.

Low unemployment and rising wages are putting more households in a position to buy, somewhat insulating the broader real-estate sector from a global slowdown.

Tuesday's report showed the number of new homes for sale in May would last 6.4 months at the recent pace. That is up from 5.6 months a year earlier. The median sales price of a new home in May was $308,000, down from $316,700 a year earlier. But lower prices and more supply didn't stoke better demand last month.

While sales fell sharply in the Northeast and West, they rose in the South to the highest level in a decade. That is a positive sign because the South is the largest region for new-home sales.

Write to Eric Morath at eric.morath@wsj.com

 

(END) Dow Jones Newswires

June 25, 2019 12:12 ET (16:12 GMT)

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