The latest news regarding new home sales falling to an eight-month low in June spilled over into the government debt space as the benchmark Treasury yields ticked lower on Wednesday. The yield on the benchmark 10-year Treasury notched down to 2.943% at as of 2:15 p.m. ET and the yield on the 30-year Treasury bond dipped to 3.07%.
In addition to the June decline reported by the Commerce Department, sales were revised lower for the previous month. Back-to-back declines, particularly when summer typically marks an uptick in real estate activity points to possible weakness in the real estate market.
The Commerce Department reported new home sales dropped 5.3 percent to a seasonally adjusted annual rate of 631,000 units in June–its lowest level since October 2017. May’s sales pace was revised down to 666,000 units from an initial report of 689,000 units.
Further weakness in the housing market is corroborated with homebuilding falling to a nine-month low in June and existing home sales declining for a third straight month. Furthermore, building permits dropped to a nine-month low in June.
Issues related to rising building material costs, shortages of land and shortages in labor are to blame for a lower housing supply, putting upward pressure on prices and discouraging new home buyers. Though real estate has sector-specific implications, it also affects the broad market as it constitutes between 15% to 18% of GDP, according to the National Association of Home Builders.