Economic Report: New Home Sales

Sales of new homes in the US declined to their lowest levels in 46 years, after a lackluster December in which sales fell by a stomach-wrenching 14.7%. Sales fell to a seasonally adjusted annual rate of 331,000, the lowest ever since the series began in 1963. The report was far below expectations, as economists were predicting a number closer to 390,000. The government estimates that 482,000 new homes were sold in 2008. This is 37.9% below the 776,000 homes sold in 2007, a record decline.

The inventory of unsold homes plunged 10.0% to 374,000, the 19th consecutive monthly decline. But because the sales pace has been so weak, the month supply has stayed high. At the December sales pace, the inventory represented 12.5 months’ supply of homes. That number should be closer to 6 months, the historical average.

Regionally, sales plunged 28.2% in the Northeast and 20.2% in the West. Sales fell 12.1% in the South and 5.6% in the Midwest. The median price of new home sales in these regions for December was $206,500, down 9.3% from a year ago.

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