U.S. new home sales fell 5.3% to a seasonally adjusted, annualized pace of 433,000 in October -- the lowest annualized level since 1991, the U.S. Commerce Department announced Wednesday (pdf).Economists surveyed by Bloomberg News had expected October new home sales to register a 450,000 annualized rate.
Further, new home sales are down 40.1% compared to a year ago. In 2007, 776,000 new homes were sold, compared to 1.05 million in 2006. And the median sales price for a new house decreased to $218,000 in October, a drop of 7% in the past 12 months.
Sales fell in two regions -- declining 18% in the West and 6% in the South. Sales rose 22.6% in the Northeast and 6% in the Midwest.
One bright spot: inventories declined 8% in October to 381,000 units, a roughly 11-month supply at the current sales pace. Inventories have now declined 25.7% in the past year, the largest decline since the federal government started tracking data in 1963.
October data is mixed
Economist Peter Dawson called the October new home sales stats a smorgasbord of data, some positive, some negative.
"We did see a substantial decline in inventories, so that's a positive. The problem is, the rate of new home sales is now so low, due to the recession and credit crunch, that it's still going to take a long time to work off inventories, which are still very high at 11 months," Dawson said.
Dawson added that if credit conditions improve, that will assist the U.S. sector's recovery; if not, the reverse. "Credit must normalize to help work-off these inventory levels. But even with improved credit conditions, the housing market is not likely to enter a recovery phase until mid/late 2009.
Many economists and analysts expect new home sales to continue to decline in 2008, primarily due to the recession, home builder cutbacks to reduce inventories, and tight credit conditions. Analysts also say the U.S. new home sector may incur a corrective period as long as two to three years -- lasting through perhaps the end of 2009 -- as the market continues to correct for speculative overbuilding and home purchases in selected regions of the country during the housing boom.
Housing Sector Analysis: Bitter-sweet data for the housing sector. Inventories of new homes decline by a record amount, but keep in mind the category was at very high inventory levels. Further, with the sales pace so slow now, it will still take several quarters for inventory levels to get their more typical three to five month supply.
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Reader Comments (Page 1 of 1)
11-30-2008 @ 1:15AM
Bob said...
I think that it will take at least 2 years for this real estate market to find its bottom, and then it will stay there for a long time. I am in no rush to hurry, because once it finds it bottom, it will hang out there for a while.
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