Ahead of the Bell: US New Home Sales

US new-home sales expected to show increase in August following dip in July

Associated Press
US new-home sales jump 7.9 percent in August

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FILE - In this Thursday, Aug. 1, 2013, file photo, a sidewalk gets shaped in front of new construction in Omaha, Neb._The Commerce Department reports on new-home sales for August on Wednesday, Sept. 25, 2013. (AP Photo/Nati Harnik)

WASHINGTON (AP) -- The Commerce Department reports on the number of Americans who bought new homes in August at 10 a.m. EDT Wednesday.

GAIN EXPECTED: Economists predict that sales rose 9.1 percent to a seasonally adjusted annual sales rate of 430,000 in August, up from 394,000 the previous month.

SALES DROP: Americans cut back sharply on new home purchases in July, raising concerns that higher mortgage rates had started to slow the housing recovery.

Sales were still up 7 percent in the 12 months that ended in July. Yet the annual pace remains well below the 700,000 consistent with a healthy market.

RECOVERY STILL INTACT: The housing market has been one of the strongest performers this year in an otherwise sluggish economy, helped by steady job gains, low mortgage rates and a limited supply of available homes for sale.

But mortgage rates have risen a full percentage point since May. Some economists say higher rates could steal some momentum from the recovery, citing the July drop in new-home sales as evidence.

Still, other data suggest the impact may be minimal. U.S. builders started work in August on the most single-family homes in six months and requested permits to construct even more in future months. A measure of their confidence in September remained at its highest level in eight years.

Prices continue to rise. And Americans are still buying homes. Sales of previously occupied homes rose in August to a seasonally adjusted 5.5 million annual pace, the National Association of Realtors reported last week. That's a healthy level and the highest in more than six years.

The realtors' group cautioned that the August pace could represent a temporary peak. The gain reflected closings and largely occurred because many buyers rushed to lock in mortgage rates in June and July before they increased further. The Realtors said buyer traffic dropped off noticeably in August, likely reflecting the higher rates.

Many economists say the housing recovery should withstand the recent rate increase. Mortgage rates are still quite low by historical standards. The average rate on a 30-year fixed mortgage was 4.5 percent last week.

Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to National Association of Home Builders.

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