WASHINGTON (AP) — Fewer Americans bought new homes in July, evidence that the housing sector is struggling to gain traction more than five years into the economic recovery.

The Commerce Department said yesterday that new-home sales fell 2.4 per cent last month to a seasonally adjusted annual rate of 412,000. The report also revised up the June sales rate to 422,000 from 406,000.

New-home sales plunged 30.8 per cent in the Northeast, followed by smaller drop-offs in the Midwest and West. Purchases were up 8.1 per cent in the South, a region that usually accounts for more than half of all new-home sales.

Inventory of new homes on the market rose to six months, a level last reached in October 2011. The median price of a new home last month was US$269,800, up 2.9 per cent over the past 12 months.

But the steady rebound in construction coming out of the Great Recession has stalled. Sales lost much of their momentum beginning last October, derailed by modest wage growth, a bump in mortgage rates and many builders focusing more on rental apartments and high-end homes for wealthier buyers.

The monthly sales data can be extremely volatile, yet the trend line shows that the market for new homes is “running in place”, said Richard Moody, chief economist at Regions Financial.

“The sales rate basically has not budged over the past 10 months,” Moody said.

The sales data dampened enthusiasm over other recent reports that the pace of buying has recently improved.

“This is a softer report than expected and suggests housing demand has stabilised in recent quarters, as opposed to improving,” said Michael Gapen, an analyst at the bank Barclays.

Sales of existing homes rose 2.4 per cent in July to a seasonally adjusted annual rate of 5.15 million, the National Association of Realtors reported last week. That’s the fourth consecutive monthly increase and the highest annual rate since September of last year.

The report showed that “distressed” sales are making up a lower share of purchases. Sales are distressed when they are the result of foreclosures or involve homes for which the seller owed more on the mortgage than the home was worth.

Distressed sales accounted for nine per cent of the purchases in July — the lowest share since the association began tracking the figure in October 2008. Distressed sales, which tend to drag down neighbourhood prices, accounted for 36 percent of sales in 2009.

Separately, construction starts climbed 15.7 per cent in July to a seasonally adjusted annual rate of 1.1 million homes, the government said. Applications for building permits, a gauge of future activity, also rose last month.

But much of the construction gains came from the apartments sector, which experienced a 33 per cent increase last month. By contrast, single-family home construction rose 8.3 per cent.