The housing market is finally seeing a rebound of sorts: Sales of new single-family homes rose in June by a stronger than expected 23.6 percent over May's record low.
But how builders achieved those new home sales is less encouraging. The average selling price of a new home dropped to $242,900, the Commerce Department reported Monday. That's the lowest selling price for June since 2003 and the biggest year-over-year decline since the depths of the great recession in April 2009.
June's surge in sales "is the first good piece of news for the housing market in a number of months," writes Paul Dales, an economist with Toronto-based Capital Economics, in an analysis. "Nonetheless, it doesn't alter our belief that high unemployment, tight credit conditions and low confidence will mean that housing activity will remain uncomfortably weak for some time."
June's rebound to a seasonally adjusted annual rate of 330,000 homes surprised analysts on the upside. Consensus estimates were closer to 310,000. But the Commerce Department also revised May's figure down from 300,000 to 267,000. So the total for the two months was on par with estimates, which suggests that the housing market is finally emerging from the weakness after homebuying tax incentives expired in April, analysts said.
Also positive was the drop in inventory of new homes for sales, down from 9.6 months of supply in May to a more normal 7.6 months in June.
The challenge is that the supply of new homes and the much larger pool of existing homes is still weighing on the price of homes, which could still fall further, analysts say.