New home sales in the United States disappointed expectations and fell in July to the lowest level in five months, as more Americans are buying fewer new homes, evidence that the housing market is still struggling to gain momentum, still sluggish since the recession.
Data released today by the United States Commerce Department show the number of new homes bought in July declined by 0.7 percent to 298,000 from 300,000 in June. This was lower than economists predictions of 310,000.
One factor contributing to the dip in new home sales is the fact that almost 2 million distressed properties will reach the market, which is a huge number for new home builders to contend with. Such a number will take years to absorb as the unemployment rate remains elevated at around 9 percent. Some home buyers prefer to opt for buying these foreclosed homes at a cheaper price than new homes.
Even U.S. Fed Chairman Ben Bernanke acknowledged a slowing housing market in his testimony to the U.S. Congress on July 13. He said “Residential construction activity remains at an extremely low level.” “The demand for homes has been depressed by many of the same factors that have held down consumer spending more generally, including the slowness of the recovery in jobs and income as well as poor consumer sentiment.”
The dollar fell against the euro and the yen after the data. EURUSD rose from 1.4376 to 1.4417 after forty minutes from the data. USDJPY fell to 76.48 from 76.62.