New-Home Sales Take Steep Slide

June's sales drop 7% from the prior month, while inventories remain high.
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Updated from 10:20 a.m. EDT

New-home sales tumbled nearly 7% from May to June, and inventories remained at heightened levels -- a fresh sign that the housing market is showing no signs of improvement.

Sales totaled an annual rate of 834,000 homes in June, the Census Bureau said Thursday. That was down from May's rate of 893,000 units -- which itself was downwardly revised from the previously estimated 915,000 units.

The sales level in June was down 22% from a year earlier.

The results were worse than expected, as economists predicted an annual level of 900,000, according to



Inventory totaled 537,000 units at the end of June, which exactly matched the level from May. The fact that inventories are not being reduced despite the large price cuts by homebuilders is a troubling sign.

Inventory represented 7.8 months of supply at the current sales pace, up from 7.4 months in May.

The median price of a new home fell to $237,900, the lowest level in at least the past year.

"It's not a great set of data. That being said, it's one month," says Adam York, economic analyst with Wachovia.

"We had rising mortgage rates in June," he points out. "They have come back down a bit in July."

The average 30-year fixed rate mortgage was 6.66% in June, up from 6.26% in May. Recently the 10-year Treasury yield -- a basis for mortgage rates -- has fallen.

However, mortgage rates still remain higher than the spring. The average 30-year mortgage now carries a rate of 6.75%, said Thursday, down from 6.82% last week.

The home sales report follows dismal second-quarter reports from homebuilders

D.R. Horton

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Beazer Homes

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, all of which were forced to record big charges tied to falling prices and declining values of their land. Each also signaled that market conditions remain extremely weak.