Falling new U.S. home sales could also lower prices

August 26, 2013 01:25PM

The latest figures on new U.S. home sales were less than thrilling, but the lackluster numbers may have the unexpected perk of lowering new home prices.

In July, new home sales hit a seasonally-adjusted 394,000, a 13.4 percent drop from the revised June rate of 455,000. The figure was lower than most industry analysts expected, with many pointing to high interest rates as the culprit.

A new home in the U.S. cost $322,700 on average in July, according to the U.S. Census report cited by the Wall Street Journal. The figure is marginally less than the all-time high of $337,000, hit in April.

A lack of lots ready for residential construction has also ticked up prices, causing some builders to have “metered” sales in which they limit output of new homes to reap fatter profits while demand is pushing prices higher.

But with interest rates rising and sales slipping, they may begin to feel the pressure to calm prices to keep customers coming.

“The problem has been that [builders] are being forced to raise prices because they’re paying more for their ingredients,” David Crowe, an economist with the National Association of Home Builders, told the Journal. “To the extent that is beginning to taper, the builders also can afford to modify the increases they’ve had so far.”

Prices “still will go up, but they might not go up at the same pace,” he said. [WSJ]Julie Strickland