US new-home sales plunge as mortgage rates rise

US new-home sales plunge as mortgage rates rise

US new-home sales plunge as mortgage rates rise

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by CHRISTOPHER S. RUGABER / AP Economics Writer

KTVB.COM

Posted on August 23, 2013 at 10:39 AM

Updated Friday, Aug 23 at 10:39 AM

WASHINGTON -- Americans cut back sharply in July on their purchases of new homes, a sign that higher mortgage rates may weigh on the housing recovery.

The Commerce Department says new-home sales dropped 13.4 percent to a seasonally adjusted annual rate of 394,000. That's down from a sales pace of 455,000 in June, which was revised sharply lower from a previously reported 497,000.

Other reports suggest higher mortgage rates could be slowing the housing market's momentum. In July, builders started work on the fewest single-family homes in eight months. And mortgage applications from potential buyers have fallen since rates have risen more than a full percentage point.

Still, most economists expect the housing recovery will persist. Even after July's steep drop, new-home sales were 7 percent higher than 12 months earlier.

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