New-Home Sales and Prices Continue to Drop
February 27, 2008 - Sharply lower prices failed to perk up sales of new homes in January 2008, a government report showed on Wednesday, as a closely watched index fell to its lowest point in 13 years.
Sales of newly constructed homes dropped 2.8 percent from December 2007, to an annual rate of 588,000. It was the third consecutive monthly decline. The median price of a new home sold in January fell to $216,000, down 15 percent from a year ago, according to the Commerce Department.
“Another month, another disastrous U.S. new home sales report,” wrote Dimitry Fleming, an economist at ING Bank. “New home prices have not dropped this fast in over 35 years.”
In an ominous sign for builders, inventories of unsold homes continued to rise. At the current sales rate, it would take nearly 10 months to sell off the backlog.
The housing market is struggling to shake off a wave of foreclosures and more stringent lending standards for mortgages. Would-be buyers are waiting for prices to fall even further, economists say, and many predict sales to stay light through at least the summer. A general slowdown in the economy is also expected to keep demand weak.
The number of new homes on the market dropped as well, suggesting that some builders, exasperated by the lack of demand, have simply given up on selling some of their homes.
Toll Brothers, a leading builder, said on Wednesday that its fiscal first-quarter sales tumbled 23 percent, leading to a $96 million loss. The Pennsylvania-based company was forced to write down $245 million in unsold properties, doubling its charges from a year ago.
Still, its shares rose 4.2 percent in early trading Wednesday; shares of rival builders D. R. Horton and Lennar were also up.
“We look at the rally in home builders’ stocks in utter bewilderment,” Ian Shepherdson, an economist at High Frequency Economics, wrote in a research note.
The latest readings on home sales coincided with more evidence of economic trouble on other fronts. A Commerce Department report showed that businesses were spending less on durable goods, a sign that companies may be hesitant to make large purchases as the economy slows.
Over all, new orders of durable goods — products meant to last at least three years — fell 5.3 percent in January, as orders of transportation goods dropped sharply. Sales of computers and electronics fell as well.
A barometer of business spending, which excludes purchases of aircraft and defense-related products, dropped 1.4 percent.
New-Home Sales and Prices Continue to Drop
By MICHAEL M. GRYNBAUM | New York Times