New home sales drop less than expected in August

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New home sales fell 7.6% at a seasonally adjusted annual rate of 609,000 in August, according to the Census Bureau.

That was a sharp pullback from a strong pace last month, by an upwardly revised 13.8% at a rate of 659,000, which was the strongest since at least 2007. But monthly housing data are among the most volatile.

Economists had forecast that sales fell 8.3% at a seasonally adjusted annual rate of 600,000, according to Bloomberg.

“Looking past the monthly noise, we think the trend is generally stronger for home sales and construction, but it remains a bumpy path toward recovery,” wrote Bank of America Merrill Lynch economists in a preview.

“Despite our expectations of continued improvement, we think residential investment will likely be negative in 3Q, serving as a very slight drag to GDP growth.”

Once again, sales in the south accounted for the lion share of new sales, with 56%. Migration to the region and strong foreign investment are among the factors that have supported home sales.

Additionally, new homes that cost between $200,000 and $299,000 — below the median price of $284,000 — had the biggest spike in sales.

“The median price of a new home is still higher than the median price of an existing home, but as more homes come on line, we expect to see prices continue to soften as the year winds down, however modestly, which will give buyers a small bit of breathing room,” said Svenja Gudell, Zillow’s chief economist, in a note.

At the sales rate in August, there were 4.6 months of housing supply on the market, up from 4.2 months in July, but below levels seen earlier this year.

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