New Home Sales Drop Sharply

WASHINGTON (August 23, 2013)—New home sales dropped sharply in July, a sign that higher mortgage rates may weigh on the housing recovery, the U.S. Commerce Department said Friday.

The Commerce Department says new-home sales dropped 13.4 percent to a seasonally adjusted annual rate of 394,000, 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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