Aug. 23, 2013 (Bloomberg) -- Purchases of new U.S. homes plunged 13.4 percent in July, the most in more than three years, raising concern higher mortgage rates will slow the real-estate rebound.
Sales fell to a 394,000 annualized pace, Commerce Department figures showed today in Washington. The reading was the weakest since October and was lower than any of the forecasts by 74 economists Bloomberg surveyed.
A jump in borrowing costs over the past three months may be prompting buyers to hold back, showing the difficult job ahead for Federal Reserve officials as they try to wean the economy from monetary stimulus while sustaining growth. The falloff in demand is in contrast to a surge in confidence among builders such as Toll Brothers Inc., which suggests they remain optimistic about the long-term outlook as employment improves.
“It’s definitely a rate shock,” said Doug Duncan, chief economist at Fannie Mae in Washington. “You could see another month or two of weak sales or it could go longer. This is a sustainable recovery, but we’ve also said it’s not robust. Along the way, there will be some hiccups. This is certainly a hiccup.”