New-Home Sales in January 2008 Fall to 13-Year Low

WASHINGTON (AFP) - February 27, 2008 - Sales of new homes in the United States fell to a 13-year low in January 2008 and prices skidded further, the Commerce Department said Wednesday in a report highlighting the woes of real estate.

Home builders are facing the biggest inventory overhang since the 1981 recession, the department said.

Last month’s new home sales were down 2.8 percent to a seasonally adjusted annual rate of 588,000 units, the lowest since a 559,000 rate in February of 1995.

Forecasters had expected a much smaller slowdown to 600,000 annual units.

The January sales pace was 33.9 percent below the January 2007 estimate of 890,000.

“New-home sales have been the weakest sector of the housing market and the situation remains dire. Prices are declining and builders are stuck with inventory,” said Dick Green, an analyst at Briefing.com.

The median price of a new home was down a record 15.1 percent from a year earlier to 216,000 dollars. On a monthly basis, median prices were down 1.46 percent.

The average sales price climbed 3.25 percent for the month to 276,000 dollars. That partly offset an 8.86 percent monthly drop in December.

Builders managed to cut 2.2 percent off the actual number of unsold homes to 482,000, but with the slowing sales rate they were left with a 9.9 months supply, the highest inventory since a 10.3-month supply in October 1981.

Despite the builders’ best efforts to get out from under the inventory overhang with lower prices and sales incentives, consumers have not responded in sufficient numbers. Mortgage lending has tightened and many potential buyers are either fearful of buying a depreciating asset or waiting for even more price discounting.

Sales estimates were revised down by 4,000 units for November and up 1,000 for December.

Sales of new homes fell in all regions of the country except the West, where they rose 2.2 percent. Sales fell 10.3 percent in the Northeast, 7.6 percent in the Midwest and 2.4 percent in the South.

Green pointed out that while existing home sales have started to level off, “the situation with new home sales may be more precarious.”

Builders tend to be more willing to lower prices than homeowners, suggesting that further price cuts may be necessary to boost sales in the worsening property slump.

Builders have been slashing prices and offering incentives such as built-in spas, plasma televisions and gym memberships in an effort to lure wary customers after the collapse of a housing bubble two years ago.

Foreclosures have surged in a housing-related credit crunch, further dragging down sales.

In 2007, new home sales plunged by 26.4 percent from the prior year, the biggest annual fall on record, to an estimated 774,000 properties, the worst level since 1996.

New home prices inched up 0.2 percent to 246,500 dollars compared with 2006.