New Home Sales Drop for Second Month

By:
Kirk Haverkamp | January 27, 2010

New home sales fell to an annual rate of 342,000 in December, according to figures released today by the Commerce Department, exceeding the expectations of economists who had predicted a much smaller decline.

Sales fell 7.6 percent from November’s seasonally adjusted rate of 370,000; economists had predicted a slight decline to 366,000. It was the second consecutive monthly drop and the lowest rate since March 2009.
 
At the same time, the median sales price edged up for the month, to $221,300, up from $210,300 in November. It’s the highest figure reported in a year, since the $229,600 median price reported in December 2008.
 
The drop in sales was attributed in large part to the originally scheduled end of the $8,000 new homeowner tax credit at the end of November. Although Congress acted in early November to extend the credit through April 30 and offer a new $6,500 credit to repeat home buyers as well, most analysts believe the action did not come in time to affect December sales, given the lead time typically involved in home purchases in general and new homes in particular.
 
New home sales fell sharply in November and December after holding steady at around a 400,000 annual rate from June through October. An estimated 374,000 new homes were sold in 2009, 23 percent less than the 485,000 reported sold in 2008.
 
An estimated 231,000 new homes were available for sale at the end of December, the lowest inventory since 1971. The figure represents an approximately eight month supply at current sales rates.

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