Washington – Sales of new homes soared to an all-time high in June as the red hot housing market kept sizzling.
Meanwhile, orders for big-ticket manufactured goods posted a surprisingly strong 1.4 percent increase last month as the country’s factories continued to signal a rebound after a weak spring. Analysts said both the housing and orders reports showed an economy with plenty of momentum headed into the second half of the year.
David Huether, chief economist for the National Association of Manufacturers, said the strength in orders “signals that a broad-based manufacturing recovery will begin to re-accelerate in the second half of the year.” On Wall Street, the Dow Jones industrial average was up slightly in late morning trading.
The Commerce Department reported today that new single-family homes were sold at an annual rate of 1.37 million units last month. That was up 4 percent from the previous record of a 1.32 million sales pace set in May.
Sales of existing homes also set a record in June as the housing industry continues to be powered by low mortgage rates. However, the Commerce Department reported that the median price of a new home fell for a second month, dropping by 5.5 percent in June to $214,800.
The 5.5 percent decline in the median sales price, the point where half the homes sold for more and half for less, followed a 2.2 percent drop in new home prices in May. New home prices had set a record at $232,600 in April.
The retreat in prices over the past two months was likely to be seen as a favorable development by economists who had begun to worry that a bubble was developing in housing as speculative fever was driving home prices to unsustainable levels similar to the stock market bubble which burst in early 2000.
Many economists believe we may be seeing the peak for home sales and prices as mortgage rates begin to rise. They are forecasting that sales gains and prices will level off in the second half of the year.
The overall economy grew by 3.8 percent at an annual rate in the first three months of this year and analysts believe growth in the April to June period will be almost as strong, coming in at around 3.5 percent despite a surge in oil prices this year and continued interest rate increases from the Federal Reserve.
The 1.4 percent increase in durable goods in June followed a 6.4 percent surge in orders in May, which reflected a big increase in sales of commercial aircraft. After soaring by 167 percent in May, orders in this volatile sector fell by 24.2 percent in June.
Orders for new cars and auto parts edged down a slight 0.1 percent in June after having risen by 0.6 percent in May.
Automakers, led by General Motors, have brought back attractive incentive offers to reduce a backlog of unsold cars which had caused production cutbacks in recent months.
Excluding transportation, durable goods orders were up a solid 2.6 percent in June, nearly triple the 0.9 percent rise in orders outside of transportation in May.
The strength outside of transportation was led by an 18.3 percent surge in demand for communications equipment and an 8.7 percent jump in orders for computers and related products.
Orders for non-defense capital goods excluding aircraft rose by 3.8 percent in June, the biggest increase since a 4.4 percent rise in January. This category is closely watched for the clues in can give about industry plans to expand and modernize.
