Ahead of the Bell: US new-home sales

New-home sales expected to rise in July

Associated Press
Sales of US new homes soar in August
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FILE - In this Wednesday, Sept. 10, 2014 file photo, construction is underway at a housing development in Zelienople, Pa. The Commerce Department reports on sales of new homes in August on Wednesday, Sept. 24, 2014. (AP Photo/Keith Srakocic, File)

WASHINGTON (AP) -- The Commerce Department reports on sales of new homes in August. The report will be released Wednesday at 10 a.m. Eastern.

SALES UP: Economists forecast that sales of new homes rose 4.3 percent last month to a seasonally adjusted annual rate of 430,000, according to a survey by the data firm FactSet. That would reverse two straight months of declines, with sales falling 2.4 percent to an annual rate of 412,000 in July after suffering a 7 percent decline in June to 422,000.

TOUGH MARKET: The housing market has sputtered for much this year. A nascent rebound in sales and prices began to stall toward the middle of 2013. Ferocious winter weather delayed construction and limited sales at the beginning of 2014. Buying did pick up over the summer, yet the pace of sales has been depressed by sluggish wage growth and the surge in prices last year that put homes out of reach for many Americans.

There are a number of signs that another housing uptick may be in the works.

The National Association of Home Builders/Wells Fargo builder sentiment index climbed in September to 59, the highest reading since November 2005. Readings above 50 indicate more builders view sales conditions as improving.

That has yet to translate into more construction, however.

In August, homebuilding fell 14.4 percent compared to the prior month to a seasonally adjusted annual rate of 956,000 houses and apartment complexes, according to the Commerce Department.

Much of that decrease was in the volatile apartments sector. Homebuilders started single-family houses at an annual rate of 626,000 last month, slightly below the pace of 631,000 in August 2013.

Existing home sales have also eased back compared with last year's pace.

Purchases of existing homes fell 1.8 percent to a seasonally adjusted annual rate of 5.05 million in August, the National Association of Realtors said this week. Sales fell from a July rate of 5.14 million, a figure that was revised slightly downward. Overall, the pace of home sales has dropped 5.3 percent year-over-year.

Sales of existing homes continue to lag last year's pace of 5.1 million. Annual sales of 5.5 million are consistent with a healthy housing market, according to analysts.

With sales falling off, the rapid price increases of last year have begun to ease.

Prices rose 7.4 percent in July from July 2013, according to real estate data provider CoreLogic. That was slightly below June's year-over-year increase of 7.5 percent and far below a recent peak of 11.9 percent in February.

Still, many potential buyers lack the income to save for a down payment.

The Census Bureau said last week that median household incomes were $51,939 in 2013. Adjusting for inflation, that's 8 percent lower than in 2007, when the recession began.

And mortgage rates have stated to increase from recent lows.

Average rates for 30-year mortgages rose last week to 4.23 percent from 4.12 percent, according to mortgage company Freddie Mac. Mortgage rates are below the levels seen at the start of this year, yet they're up from their 52-week low of 4.1 percent.

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