Two years into the economic recovery, the housing market is still showing signs of struggle. New numbers released by the Commerce Department today showed that purchases of new homes fell 0.7 percent in July and hit the lowest level in five months.
Builders are less inclined to start new projects as they face competition from cheaper existing homes and the prospect of foreclosures putting more unsold properties on the market. A jobless rate above 9 percent and limited employment growth indicate housing may keep weighing on the recovery even with mortgage rates at a record low.
"There is no upside momentum at all in housing," said Eric Green, chief market economist at TD Securities Inc. in New York, whose forecast for sales was 300,000. "Without any meaningful job growth, we're going to continue to look at a housing sectors that is moribund."
The Commerce Department also revised its June sales numbers down. They said June sales were down 2.9 percent instead of the 1 percent reported earlier.
The July number is slightly down from what economists had predicted. The Wall Street Journal reports:
Economists surveyed by Dow Jones Newswires had forecast sales in July would drop 0.6% to an annual rate of 310,000. Sales are far short of healthy levels, considered to be an annual rate of around 750,000.
Some consumers are putting off purchases because the jobs market is bad or they are uncertain about the direction of prices.
The median price in July for a new home, at $222,000, was higher than it had been a year earlier. But it was lower than the price the month before.
Other consumers aren't buying homes because they can't get financing.