Ahead of the Bell: US new-home sales

WASHINGTON – The Commerce Department reports on sales of new homes for June at 10 a.m. Eastern Tuesday.

SALES BUMP: Economists believe sales improved 1.6 percent last month to a seasonally adjusted annual rate of 560,000, according to a survey by the data firm FactSet. The increase would follow a 6 percent decline in May. Still, the government report can be extremely volatile on a month to month and the broader trend has been a steady 6.4 percent gain in new-home sales year-to-date.

SOLID DEMAND: Low mortgage rates and a healthy job market have lifted the real estate market, which continues to recover from the depths of the housing bust. But rising prices and tight inventories suggest that the sales growth of the past few years are reaching some financial limits. Builders say they're struggling to find workers and land for additional construction.

In May, the median sales price rose 1 percent from a year ago to $290,400. That would likely have been higher if not for the steep monthly declines in the pricier Northeast and Western regions. Despite recent improvements in new-home sales, the rate lags the historical average of roughly 650,000 a year.

The market for new houses is roughly just a tenth of the size of the existing-home market, where sales are climbing even as the number of listings are shrinking on a yearly basis. The National Association of Realtors said last week that sales of existing homes rose 1.1 percent in June to a seasonally adjusted annual rate of 5.57 million, the best performance since February 2007. But the number of listings has fallen 5.8 percent from a year ago to 2.12 million.

Builders remain relatively confident that they'll continue to expand, although their optimism waned slightly in July.

The National Association of Home Builders/Wells Fargo builder sentiment index dropped one point to 59. Readings above 50 indicate more builders view sales conditions as good, rather than poor. The index had mostly held at 58 this year before rising to 60 in June.

Builders' view of current sales and traffic by prospective buyers slipped one point this month. Their outlook for sales over the next six months slid three points.

Construction of single-family houses has increased, rising 4.4 percent to a seasonally adjusted annual rate of 778,000 in June.

Propelling much of this demand has been an improving job market coupled with cheaper borrowing costs.

The unemployment rate is a solid 4.9 percent. Employers added 287,000 workers in June, a strong rebound after the pace of hiring slipped in April and May.

Buyers have also benefited from interest rates staying close to record lows. Mortgage buyer Freddie Mac said the average for the benchmark 30-year fixed-rate mortgage was 3.45 percent last week, down sharply from 4.04 percent a year ago.