New home sales dipped in June, a sign of the lingering effects of elevated US interest rates
New home sales dipped in June, a sign of the lingering effects of elevated US interest rates AFP

The sales rate of new family homes in the United States dipped in June, missing analyst estimates amid still elevated interest rates, according to government data released Wednesday.

New home sales in June came in at an annual, seasonally-adjusted rate of 617,000, according to data released jointly by the US census and housing departments.

That was below the 621,000 rate in May, according to Wednesday's revised figures, and under the 640,000 projected by analysts.

"Many potential buyers are remaining in a holding pattern due to elevated mortgage rates that averaged near seven percent in June," said Carl Harris, chairman of the National Association of Home Builders.

"However, moderating inflation suggests lower interest rates in the months ahead and that should bring more buyers off the sidelines."

The figure refers to the number of homes sold over a whole year if sales continue at the rate seen in June.

The median price in June was $417,300, up 2.5 percent from the prior reading.

The data comes on the heels of a report Tuesday that also showed a drop in sales of previously-owned homes that also missed analyst estimates.

The June report on top of the weak May data show the "spring bounce in sales appears to have reversed," said a note from Ian Shepherdson of Pantheon Macroeconomics.

Mortgage rates currently stand below their four-week and 52-week average, according to Freddie Mac.

However, interest rates remain well above their levels for most of the last decade following a series of large Federal Reserve rate hikes in 2022 and 2023 to counter inflation.

Analysts expect that a reduction in the Fed's benchmark lending rate later this year will help mortgage rates decline further, boosting home sales.

New home sales are expected "to improve slightly" in the second half of the year, according to a note from Oxford Economics.

"Mortgage rates have fallen nearly 50 basis points to about 6.75 percent since early May and we expect rates to fall further as the Fed's rate cutting cycle gets underway," said the Oxford Economics note.