New Homes Sales Hit Record Low
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- Kara Johnson | February 24, 2010
Sales of newly built homes fell to an all-time low in January, a stunning setback for an industry that appeared to be in recovery just three months ago.
Sales of new single-family homes declined to an annual rate of 309,000 in January, the lowest rate since the Commerce Department began tracking data in 1963. The drop confounded economists, who had expected a small increase from December’s rate of 348,000.
The median sales price on newly built homes was also down significantly in January, to $203,500, down from $215,600 the month before.
The Commerce Department cautions that single-month figures are unreliable and are subject to large sampling errors. The Department cautions that three months are typically required to establish reliable trends. However, the size of the current decline strongly suggests that a steep decline has really occurred.
After falling to a rate of 329,000 in January 2009, new home sales recovered through the spring and held steady near a rate of 400,000 through the summer and into October. Sales then dropped to around 350,000 for the next two months, then dropped again to their current level in January.
Some analysts suggest that a growing supply of foreclosures and bargain prices on existing homes are undercutting demand for new home construction. However, recently released figures from the National Association of Realtors showed that existing home sales have also dropped sharply, with December sales down nearly 17 percent from November after following a similar trend of increases through much of 2009.
The December annual rate of existing home sale was down by a million units a year, from 6.5 million in November to 5.5 million in December, according to the NAR.
The new figures raise concerns that the housing market continues to struggle and could possibly be headed for another downturn. The year 2009 was already the worst for new home sales since the Commerce Department started keeping records a half century ago, with only 374,000 units sold. The National Association of Homebuilders had forecast that would rise to 500,000 in 2010, a figure that now appears in doubt.
By comparison, during the peak years of the housing market in the past decade, new home sales were running at a pace of 1 million a year.
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