WASHINGTON — Purchases of new homes plunged in July by the most in more than three years, and previous months were revised down, a sign that growth in the industry may be taking a pause as mortgage rates rise.
Sales of newly built homes declined 13.4 percent to a 394,000 annualized pace, the weakest since October, following a 455,000 rate in the prior period that was lower than previously estimated, Commerce Department figures showed Friday. The median estimate of 74 economists surveyed by Bloomberg called for a decrease to 487,000.
Last month’s decline was the biggest since May 2010.
Builders are holding back amid constraints on available land and materials in a bid to boost prices and revenue. At the same time, more jobs and pent-up demand may help sustain gains in housing as homebuyers rush to take advantage of historically low borrowing costs before they rise further.
“The housing recovery itself is likely to take a bit of a breather,” Millan Mulraine, director of U.S. rates research at TD Securities USA in New York, said before the report.
New-home purchases were 6.8 percent higher in July than the same period in 2012 on an adjusted basis, Friday’s report showed. The median price of a new home increased 8.3 percent last month from a year ago to $257,200.
The slump in new-home sales last month is at odds with growing builder confidence that’s at the highest level since November 2005.
Rising home prices and gains in stock portfolios and employment have increased the appeal of purchasing a home, with Toll Brothers, the largest U.S. luxury-home builder, reporting sales that grew 24 percent in the three months through July from the year before.
Orders rose 26 percent to 1,405 homes.