Big Drop in New-Home Sales

Posted by: Peter Coy on March 24, 2006

An eye-popping drop in new-home sales announced today by the Census Bureau.

Sales fell 10.5% from January to February. That put them 13.4% where they were in February ‘05.

Don’t blame it on the big snowstorm that hit the Northeast, giving New York’s Central Park a record snowfall: sales actually rose in the Northeast.

Other bad signs for the market: The median price fell $4,000 from January to $230,400. And the inventory of unsold homes jumped from 5.3 months’ worth at the current rate of sales to 6.3 months’ worth.

Yipes.

Reader Comments

the realist

March 25, 2006 12:26 PM

Why is this bad news?

dog boy

March 25, 2006 8:24 PM

Can't say I'm surprised, House prices were fueled by housing money due to appreciation (not salaries since they long ago surpassed what people could afford based on their annual salaries). It is simple economics at work, if anyone thinks homebuilders (who were building to the high end of the market only because that was where the money was) aren't going to drop prices and builder cheaper houses (because that is where the money is now) are fooling themselves. Once new home prices come down existing home prices will follow becasue why would anyone buy a 30 year old, run down, not to code, property when a nice new one costs less? Builders aren't like existing home owners, they HAVE TO sell in order to make money. Existing home owners can try to hold on - but does not mean prices won't come down to a reasonable value.

There is no surprise in this story except for those who have had their head in the sand and living in home appreciation "its a new economy" fantasy land.

Chris Grey

March 28, 2006 2:54 AM

Here we go again. One month of decline and the commentators are predicting collapse. How many more times? The housing markt will not begin its long-awaited descent until interest rates climb high enough to make the late entrants hurt. That may never happen, because the Fed will not dare to be the cause of the housing market's fall. There's too much at stake.

Anonymous

March 29, 2006 11:26 AM

Chris, the Fed doesn't care all that much about the housing market - they totally ignored it in yesterday's report. They care about the dollar, and if it appears to them that rising interest rates will boost the dollar, they will raise rates. Sorry homeowners.

Besides, rates aren't so bad now and the market is already showing its wear. I don't think it will take much to take it down more.

Zed

March 29, 2006 8:48 PM

news flash. Fed raised interest rates for the 15th straight time and economists are predicting more rate hikes. Also, Japan's economy is rebounding and the great Asian prop-up to low interest rates is already starting to build steam. See you in 6 months when mortgage rates are through the roof. BTW, mortgage lenders are clamping down on the exotic mortgages that people where using to enter the market - so even if real mortgage rates don't move an inch the effective mortgage rate has already doubled and in some cases tripled in the last six months.

People aren't buying simply because they can't afford to. if you want to sell a house you will have to lower the price because no amount of paint makes it more affordable.

James

April 11, 2006 9:22 PM

Advice: If you have a property ... sell now!

Mabelle Sese - Miami Real Estate Agent

May 15, 2006 11:47 PM

Real Estate Dropping
Prices are compared year-over-year by NAR. This is to remove the seasonal effects in home rates. Median prices across the country dropped on the first quarter from last year's fourth quarter of $225,300 to $217,900. This is a fall of 3.3%.

Washington D.C., Los Angeles, and Chicago are just few of the major cities that experienced slight declines.

Gainesville, Florida, Ocala, Florida, Deltona - Daytona Beach - Ormond Beach, Florida, and Eugene, Oregon are the big winners.

On the other hand, Danville experienced most of the drop of home prices. South Bend, Indiana has experienced a double-digit decline.

Condo prices continue to fair less every year. It only gains 5.2% every year. In the West region, condo prices dropped by 0.8%. However, the Midwest had a gain of 0.8%. The regional gainer on condo prices is the Northwest where there was a big 9.2% gains.

Phoenix condo prices had the largest gains for the year at 38%.

Mabelle Sese
Miami Real Estate Agent

Tracy - Miami

June 26, 2006 10:13 PM

From today's news 06/26/06
US New Homes Sales Increased Unexpectedly

In May, sales of new homes rose surprising economists who had been forecasting that housing would slow down because of rising mortgage rates.

The Commerce Department reported that sales of new single-family homes increased by 4.6% in May to a seasonally adjusted annual rate of 1.234 million units. The median price of homes sold did decline to $235,300, a drop of 4.3% from the April sales price.

Analysts are still looking for sales of both new and existing homes to fall by around 10 percent this year as rising mortgage rates crimp demand. The lowest mortgage rates in four decades helped to propel sales to five straight annual records.

Tracy

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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