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U.S. new home sales fall, services sector activity cools a bit

Economic IndicatorsAug 25, 2014 10:50AM ET
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By Lucia Mutikani

WASHINGTON (Reuters) - Sales of new U.S. single-family homes fell for a second straight month in July, but a surge in the stock of properties on the market and a moderation in price increases should help to stimulate demand in the months ahead.

Other data on Monday showed activity in the vast services sectors slowed again in August. The reports, however, did little to change views the economy is on a strong growth path, against the backdrop of relatively strong job growth and manufacturing activity.

New home sales slipped 2.4 percent to a seasonally adjusted annual rate of 412,000 units, the lowest level since March, the

Commerce Department said. Economists polled by Reuters had forecast new home sales at a 430,000-unit pace last month.

The weak new home sales pace is at odds with other data that have suggested the housing market recovery is back on track. New house sales data, however, is volatile month-to-month because of a small sample.

Data last week showed a jump in new home construction in July. Home resales also rose to a 10-month high in July.

Compared to July last year, new home sales increased 12.3 percent.

In a separate report, financial data firm Markit said its preliminary services Purchasing Managers Index dipped to 58.5 this month from 60.8 in July.

A reading above 50 signals expansion in the services sector. Despite the slight cooling in activity, businesses were upbeat about prospects in the year ahead.

That fits in with expectations of sturdy economic growth in the second half of 2014 and through early next year.

U.S. financial markets shrugged off the weak data. The S&P 500 vaulted to a record high, crossing the 2,000 threshold for the first time. The dollar was up against the euro.

The housing index (HGX) rose marginally. Homebuilder DR Horton (N:DHI) fell, while Pulte Group (N:PHM) rose modestly.

A run-up in mortgage rates, as well as a shortage of homes on the market, weighed on housing in the second half of 2013.

But housing inventory is picking up and home price appreciation is slowing.

The inventory of new houses on the market increased 4.1 percent to 205,000 units, the highest since August 2010. With supply increasing, the median home price increased only 2.9 percent from a year ago.

At July's sales pace it would take 6.0 months to clear the supply of houses on the market. That was the highest since October 2011 and compared to 5.6 months in June.

Six months' supply is normally considered a healthy balance between supply and demand.

Last month, new home sales jumped 8.1 percent in the South, but fell in the Northeast, West and Midwest.

(Reporting by Lucia Mutikani; Additional reporting by Ryan Vlastelica in New York; Editing by Andrea Ricci)

U.S. new home sales fall, services sector activity cools a bit
 

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