Doubts about the strength of the U.S. economic recovery grew on Wednesday as the government said new home sales took a surprising tumble in September, snapping a streak of five straight monthly increases.
The weaker-than-expected housing data underscore the fragility of the recovery from the Great Recession and the still-weak state of the housing market.
The Commerce Department said new home sales fell 3.6% last month to an annual rate of 402,000 units. Economists had predicted sales would climb 2.6% to a rate of 440,000 units.
The government also downwardly-revised August’s figures to reflect a sales rate of 417,000 units, compared to its earlier estimate of 429,000.
The disappointing housing news wasn’t taken well by Wall Street as shares of home builders like Pulte Homes (PHM), Hovnanian (HOV) and Toll Brothers (TOL) slumped during late-morning trading.
Buoyed by historically-low interest rates, very low prices and government incentives, sales had risen for five straight months. New home sales may have been hurt last month by uncertainty surrounding the government’s $8,000 first-time homebuyer tax credit, which is set to expire on Nov. 30 but may be extended through March 31.
There was a great disparity in terms of geography in September as sales soared 34% in the Midwest and were unchanged in the Northeast but tumbled 10.6% in the West and fell 10% in the South.
The government said inventories of new home sales were unchanged at the end of September, staying at 7.5 months’ worth of supply. The median price of new home sales fell 9.1% last month to $204,800 from a year earlier.
In another disappointing sign, single-family home sales declined last month for the first time since March.
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