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U.S. new home sales post biggest drop in over one year

New U.S. single-family home sales in June fell by the most in more than a year and prices resumed their downward trend, suggesting a set back for the budding housing market recovery.

The Commerce Department said on Wednesday sales tumbled 8.4 percent to a seasonally adjusted 350,000-unit annual rate, the lowest rate in five months. The percent decline was the largest since February 2011.

May's sales pace was revised up to 382,000 units from the previously reported 369,000 units, taking some of the sting from the report.

Economists polled by Reuters had forecast sales at a 370,000-unit rate last month. Compared to June last year, new home sales were up 15.1 percent.

"Housing is still far from healed, with the last few months showing decelerating jobs growth," said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York. "It is difficult to get behind the idea that we have any meaningful momentum in housing."

The housing market had been improving in recent months, with new home construction in June hitting its highest level since October 2008 and confidence among home builders this month touching its best level in more than 5 years.

The drop in new home sales last month, coming on the heels of a decline in sales of previously owned homes, underscored the uneven nature of the housing market recovery.

Caterpillar Inc, the world's largest maker of construction equipment, on Wednesday forecast housing starts this year to exceed 750,000 units, a decline from its previous forecast of 800,000 units.

Still, housing remains the bright spot in the economy. Sectors such as manufacturing have slowed significantly in recent months amid fears of tighter U.S. fiscal policy early next year and a lingering debt crisis in Europe.

Housing continues to be challenged by high unemployment and stringent lending conditions, which are make it tough for many Americans to own a home.

Loan applications to buy homes fell last week, despite record-low mortgage rates, a separate report from the Mortgage Bankers Association showed.

Last month, the median price of a new home fell 3.2 percent from a year ago, adding to the report's weak tenor.

The inventory of new homes on the market increased 0.7 percent to 144,000 in June, but remained near record lows. At June's sales pace it would take 4.9 months to clear the houses from the market, up from 4.5 months in May.

New home sales last month dragged down by a 60 percent drop in the Northeast and an 8.6 percent fall in the South. Sales in the West rose 2.1 percent and were up 14.6 percent in the Midwest. CTV Two CTV News CTV News Channel BNN - Business News Network CP24