New Home Sales Plunge to Record Low

By:: Kara Johnson | March 23, 2011

New home sales plummeted in February, falling to their lowest level in nearly half a century of record-keeping.

Sales of newly built, single-family homes plunged to a seasonally adjusted annual rate of 250,000 in February, down from a revised rate of 301,000 the month before. It’s the lowest annual rate reported ince the Census Bureau began tracking the data in January 1963, exceeding the previous low of 274,000 set in August 2010.

The figure represents a 28.0 percent annual decline from the February 2010 level of 347,000.

The median sales price also took a big drop, to $202,100 in February, down from $234,800 the month before.

Since the Census Bureau began tracking the data, new home sales have fallen below the 400,000 mark only a handful of times prior to October 2008; since then, they have exceeded that level in only three months. By contrast, the annual rate reached as high as 1.3 million during the boom years that peaked in early 2005.

New home builders have been hit hard by a double whammy from a flood of reduced-price foreclosed homes on the market and tight credit for both homebuyers and builders themselves. The struggling new home market is considered a major drag on the economy, because new home construction plays a major role in supporting both good-paying jobs and sales of big-ticket items such as furniture and appliances, as well as construction materials.

It should be noted that the Census Bureau figures are survey estimates subject to large sampling errors. The February new home figures are subject to a margin of error of more than 19 percent, meaning the actual figure could be anywhere from 202,000 to 298,000, and will even exceed those figures 10 percent of the time.

The Bureau often revises figures from one month to the next and cautions that several months of data are needed to establish a trend.

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