US new home sales fell sharply in June despite rebounding in the prior month, the government reported Tuesday, as rising interest rates bite into American families' wallets.
New home sales fell 8.1 percent to an annual rate of 590,000, seasonally adjusted, more than expected after a recovery in May, the Commerce Department reported.
The results were weaker than what economists had expected. The sales pace was 17.4 percent slower than June 2021.
Mortgage rates have been climbing sharply in recent months, as the Federal Reserve cranks up interest rates in its battle against surging inflation.
The Fed opened its two-day policy meeting Tuesday, where it is expected to hike the benchmark borrowing rate by another three-quarters of a percentage point for a second time.
Central bankers hope the aggressive moves will cool overheated demand throughout the economy, including the housing market, where builders have struggled to keep up amid supply snarls and a labor shortage.
Home prices dipped in May, with the median cost of a new home falling to US$402,400 from US$449,000 in May.
However, the sales data can be volatile and subject to major revisions, an issue that Ian Shepherdson of Pantheon Macroeconomics stressed.
"New home sales are wildly erratic month-to-month – the margin of error in the June number was +/-15 per cent– but the trend tracks mortgage demand over time," he said in an analysis.
"The June reading will not be the bottom; we think sales will fall to about 400,000-to-450,000 by the late fall."
Rubeela Farooqi of High Frequency Economics also warned that new home sales are going to continue falling.
"Overall, home sales have downshifted sharply and are likely to be constrained going forward by ongoing increases in mortgage rates, as the Fed continues to normalize monetary policy," she said. - AFP