New home sales plunged in June after two months of gains.

Sales of recently built single-family homes dropped 8.1% from May to a seasonally adjusted annual rate of 406,000, the Commerce Department said Thursday. Sales for May and April were revised downward.

“This was a dismal report,” IHS Global Insight economist Stephanie Karol wrote in an analysis. “Sales dropped throughout the country.”

The Northeast saw the largest decline, as sales fell 20% from May. The West, a major home building region, posted the smallest drop: 2%.


Economists had expected sales to fall last month after a sharp increase in May. However, June’s numbers were worse than expected.

One reason for the drop could be that recent construction is “poorly located” and more previously owned homes have come up for sale, Karol said.

“When choosing between a new house in the middle of nowhere and an existing home in a better location, buyers are likely to choose the latter,” she said.

The new home report, however, follows signs that the housing market is heating up after starting to cool last summer amid higher prices and mortgage rates.


Sales of previously owned homes, the largest portion of the market, reached their highest level since October last month, the National Assn. of Realtors said earlier this week.

“New home sales were weak in June ... But the recent softness is at odds with other data,” Gus Faucher, senior economist at PNC Financial Services Group, said in a statement. “The housing market is gradually getting better.”

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