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August 25, 2014 10:10 AM, EDT
Sales of New Homes Falls to Four-Month Low
Mark Elias/Bloomberg News

New-home sales in the U.S. fell unexpectedly in July for the second month as the housing recovery makes only fitful progress.

Sales declined 2.4% to a 412,000 annualized pace, the fewest since March and weaker than the lowest estimate of economists surveyed by Bloomberg, after a 422,000 rate in June, the Commerce Department reported today in Washington.

“The level of activity is so much lower than what I and many others expected it to be at this point,” Richard Moody, chief economist at Regions Financial Corp. said. “It’s recovering, it’s just not recovering at the rate we expected it to heading into this year. When we do finally start seeing better earnings growth, that’ll support a better pace of home sales.”

The median forecast of 70 economists surveyed by Bloomberg News called for the pace to accelerate to 430,000.

Estimates ranged from 414,000 to 470,000. June’s pace was revised up from a previously reported 406,000.

Purchases dropped in three four U.S. regions, led by a 30.8% slump in the Northeast. The West declined 15.2% and the Midwest fell 8.8%. Sales climbed 8.1% in the South.

The supply of homes at the current sales rate rose to 6 months, the highest since October 2011, from 5.6 months in June. There were 205,000 new houses on the market at the end of July, the most in almost four years.

New-home sales, which last year accounted for about 5% of the residential market, are tabulated when contracts are signed, making them a timelier barometer than transactions on existing homes.