Ahead of the Bell: US new home sales

New home sales expected to slow in June

Associated Press
US new-home sales plummet in June

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FILE - In this Wednesday, June 20, 2012, file photo, a worker stands in the early-morning sunlight on a home construction project in Newtown, Pa. The Commerce Department reports on sales of new homes in June later Thursday July 24, 2014. (AP Photo/Mel Evans, File)

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

SALES SLIP: Economists believe that sales of new homes fell 4.8 percent last month to a seasonally adjusted annual rate of 480,000, according to a survey by the data firm FactSet.

TREND IMPROVES: Sales of new homes surged 18.6 percent in May to an annual rate of 504,000, the most robust pace since May 2008. The gains suggest that buyers are newly energized after several months of inactivity. Rising prices last year and higher interest rates limited affordability and ate into sales.

Demand for newly built homes continues to be mild based on historic averages, making it a weak spot in the five-year recovery from the recession.

Other indicators suggest an upturn after the real estate market seemed to stall in the middle of last year.

The National Association of Realtors reported that sales of existing homes increased 2.6 percent to a seasonally adjusted annual rate of 5.04 million homes. It marked the first time that sales have been above the 5 million-mark since October.

Economists were encouraged by the second straight monthly gain in existing home sales, though those sales are still hovering below the recent peak of 5.38 million sales hit last July.

It's unlikely that reinvigorated sales will make up for the slow start to the year. Sales of existing homes are expected to be below the 5.1 million homes bought last year and the 5.5 million annual sales that would be consistent with a healthy housing market.

Higher mortgage rates, rising prices, weak income growth and nasty winter storms weighed on sales of both existing and new homes in late 2013 and early 2014.

Those pressures appear to be giving way, however.

Along with the arrival of spring, average mortgage rates have dropped to 4.13 percent, from 4.53 percent at the beginning of this year, according to Freddie Mac. The rate of price gains has slowed as the inventory of homes for sale has improved.

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