New home sales plunged 14.1 percent in June to the lowest level in two years, the government said Tuesday, the latest victim of recent mortgage rate hikes.
All regions of the country participated in the decline in June, when housing starts also fell and sales of previously owned homes dropped for a second straight month.Sales of new homes totaled a seasonally adjusted annual rate of 591,000, down from a sharply revised 688,000 in May, the Commerce Department reported. The May rate initially was estimated to be 738,000.
The June rate was the smallest since 584,000 in June 1992.
In advance of the report, many analysts had predicted sales would fall to about 700,000 as higher mortgage rates took their toll.
There were indications sales fell further in July. The National Association of Home Builders said a national survey of 415 members early in the month found only 31 percent describing sales as good, down from 63 percent in December.
Fixed-rate, 30-year mortgages averaged 8.43 percent in June, down from 8.6 percent in May but well above the 25-year low of 6.74 percent last October, according to the Federal Home Loan Mortgage Corp. Rates had bounced back to 8.57 percent last week.
An increase in rates from 7 percent to 9 percent would add $209 to the monthly payment on a $150,000 mortgage.
Until Tuesday's report, many analysts had expected sales to top 700,000 this year. If they had, it would have been the first time since they hit 750,000 in 1986. Sales totaled 666,000 last year.
Sales during the first six months of 1994 were 6.2 percent above the same period last year.
The seasonally adjusted estimate of new houses for sale at the end of June was 317,000, representing a supply of 6.6 months at the current sales rate. It was the largest number of unsold homes since 321,000 were on the market in December 1990.
The median price of a new home jumped to $134,900, up 5.4 percent from May and the highest on record. The median is the midpoint, meaning half of the homes cost more and half cost less.
Regionally, sales plummeted 19.1 percent in the South, to a 254,000 annual rate. They were down 18.6 percent in the Northeast, to 48,000. The South and Northeast rates were the lowest since August 1992.
Sales plunged 10.7 percent in the West, to 175,000, lowest since June 1993. Sales fell 3.4 percent in the Midwest, to a 114,000 rate.