Worst Month for New Home Sales in 7 Years
During the past year, sales of new homes have dropped 21 percent.
Sept. 27, 2007 — -- August was the worst month for sales of new homes in seven years, according to figures released this morning by the government.
The official sales pace for last month was a seasonally adjusted annual rate of 795,000 units – well below the 867,000 economists were betting on and the slowest since June 2000.
The downward move more than erased July's uptick in new home sales, and reflects some of the credit issues that roiled the stock market last month.
During the past year, sales of new homes have dropped some 21 percent, which is forcing builders to provide huge incentives to move the houses they've completed.
For August, the government said the median price of a new home sold was $225,700 – 7.5 percent lower than the same period last year. That's the biggest drop in 37 years.
"Certainly problems across the mortgage finance arena are taking their toll on buyer demand, which is weighing heavily on builder confidence measures," said David Seiders, National Association of Home Builders chief economist, in a press release. "We now expect to see home sales return to an upward path by the second quarter of 2008 and we expect housing starts to begin a gradual recovery process by the third quarter of next year. At that point, the market will have substantial growth potential."
Inventories of new homes for sale increased to an 8.2 months supply, indicating that there are likely to be continued price reductions in the coming months as builders try to find ways to close deals.
Taken with the bad news about existing home sales numbers released this week, we have a gloomy picture of the overall market. Existing sales were down an astounding 4.9 percent last month. That's the worst monthly performance since March of this year and scuttles any hope that July's rather tepid results had offered.
