New home sales hit record

Sales post surprising jump despite rising mortgage rates, sparking debate over housing strength.
New home sales posted a surprising jump in July, the government reported Wednesday, topping Wall Street forecasts a day after a separate report sparked worries that the best days were past for the nation's housing market.
Sales of new homes jumped about 6 percent to a record 1.41 million annual rate in July from a revised 1.32 million sales pace in June, the previous record, the Commerce Department said. Economists surveyed by Briefing.com had forecast that sales would come in at a 1.33 million rate.
The reading follows a report from real estate agents Tuesday that showed existing home sales slowed more than expected to a 7.16 million annual rate in July from a rate of 7.35 million in June, which also had been a record.
Still, despite the rise in new home sales last month, the median price for a new home fell 7 percent from June to $203,800, the third straight month-to-month decline, and also fell 4 percent from a year earlier -- an unusual drop in year-over-year prices.
Last month's drop means the median price is off 11 percent since hitting a record of $229,300 in February. Half the homes sold cost more than the median price and half cost less.
Michael Carliner, economist with the National Association of Home Builders, said that while some building materials, primarily wood products, have seen declines this year, most of the decline in median prices is due to the types of new homes being sold. Somewhat smaller homes now make up a bigger percentage of homes being built, he said.
"I think it's more the mix of homes being sold than anyone cutting prices," he said.
New home sales, while a smaller market than existing homes, are more closely watched because they're more of a leading indicator.
That's because new home sales numbers are based on signed sales contracts while existing home sales are tallied from closings, which generally occur one to three months after a contract is signed.
Mortgage rates in July rose to an average 5.70 percent for a 30-year fixed-rate mortgage, according to a survey by Freddie Mac, up from the 5.58 percent rate in June, when rates were at a 15-month low.
But the rise apparently did not slow people signing contracts to buy new homes. Rates have risen further in August, according to weekly surveys, reaching 5.89 percent in the week ending Aug. 11 before slipping back to 5.80 percent last week.
"It's not unusual when you first start to see the beginnings of a rate increase, that the immediate effect is an acceleration of sales as people try to lock in the lower rates," said Carliner.
New home sales are also important to the construction industry, and the overall economy since buyers often need appliances, lighting and other furnishings.