January new home sales fall 2.8% to 588k annual rate, below estimate

Posted Feb 27th 2008 11:19AM by Joseph Lazzaro
Filed under: Bad News, Economic Data, Housing, Recession

Sales of new homes fell 2.8% to a seasonally-adjusted annual rate of 588,000 in January 2008, the U.S. Commerce Department announced Wednesday (pdf). Economists surveyed by Bloomberg had expected a seasonally adjusted rate of 600,000.

Meanwhile, the December 2007 seasonally-adjusted total was revised to 605,000.

The median sales price of new houses sold in January 2008 fell 4.3% to $216,000; the average sales price rose 0.7% to $276,600.

In addition, the seasonally-adjusted estimate of new houses for sale at the end of January 2008 was 482,000 -- representing a 9.9-month supply at current the current sales rate.

Economist Steve Affinito told BloggingStocks Wednesday the January 2008 new home sales data is in-line with earlier data on existing home sales, indicating that the housing slump is far from over.

"The important numbers in today's report are the median home price and inventories. The median home price fell over 4% to $216,000 and that indicates considerable market softness, and inventories remain at housing recession levels, almost 10 months," Affinito said. "Keep in mind that these stats are occurring while near-record-low mortgage rates are working their way into the system. So it suggests home buyers are reluctant to commit, which is understandable, given the likelihood of future housing price declines."

Housing lowers U.S. GDP

Further, Affinito said the housing sector's slump is likely to continue to subtract from U.S. GDP through at least Q3 2008, and possible well in Q4 2008. Affinito added that he now expects the slumping housing sector to lower 2008 U.S. GDP by about 1.0-1.2 percentage points.

"The U.S. economy is diverse and technology-intensive, but housing still plays a significant role because it feeds so many lateral sectors, like appliances, furniture, and home improvement/landscaping," Affinito said. "The economy really benefited from housing during the housing boom, and now we're seeing the reverse effect during the correction."

As a result, Affinito believes U.S. Q1 growth will register -0.2% to -0.5%, with a similar reading in Q2, adding that an increase in the home foreclosure rate in the second half of 2008 would deepen and prolong the recession.

Tags: average home price, GDP, home construction, inthenews, inventories, median home price, new home sales, U.S. Commerce Department, U.S. economy

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Reader Comments (Page 1 of 1)

2-27-2008 @ 12:43PM

william lindblad said...

If one were to put the cost of housing into the CPI we would be in a period of extreme inflation. Paradox? Until all costs get relative to the general economy there will nothing other than problems ahead.