9:58 PMUS Feb New Home Sales Fall 16.9% To Record Low
US Feb New Home Sales Fall 16.9% To Record Low|
By ALAN ZIBEL AND JEFF BATER
Of DOW JONES NEWSWIRES
WASHINGTON -- Sales of new homes plunged last month to a new record low and prices fell to the lowest in more than seven years as the U.S. housing market sputters even as other parts of the economy turn around.
Sales sank 16.9% from a month earlier to a seasonally adjusted annual rate of 250,000 in February, the Commerce Department said Wednesday. The previous record low of 274,000 was set last August.
New Home Sales Feb Jan Overall Sales: 250K 301Kr
Percentage Change: -16.9% -9.6%r
Months' Supply: 8.9 7.4r
The results were far worse than forecast. Economists surveyed by Dow Jones Newswires had predicted the sales rate would rise 2.1% to an annual rate of 290,000. Sales were down 28.0% from February 2010.
While sales in January were revised higher, Ian Shepherdson, of High Frequency Economics, said Wednesday's report "is still horrible." Coming off the worst year for new home sales on record in 2010, the housing market continues to struggle to recover from a painful bust.
With demand weak, prices have been falling. The median sales price for a new home sold last month was $202,100, down 13.9% from $234,800 a month earlier. It was the sharpest monthly price decline on record and the lowest median price since December 2003.
Rising consumer spending made the economy speed up at the end of 2010. Manufacturing in the U.S. is growing and even the jobs market has showed improvement. Still, unemployment remains high. That and a steady supply of foreclosures are expected to keep sales and prices low, especially in the market for newly built homes, which sell for more than previously occupied ones.
"Buyers in most cases will find more selection and better pricing in the existing home market," Daiwa Securities analyst Michael Moran said.
With demand weak, builders have kept construction low. Home construction in the U.S. took the steepest monthly plunge in nearly 27 years in February and new building permits set a record low, the Commerce Department said last week.
There is no incentive for builders to build more homes," Capital Economics economist Paul Ashworth said. "If anything, it looks like residential construction will continue to be a drag on economic growth this year."
Evidence of a double dip in U.S. home prices, meanwhile, has been mounting. U.S. home prices fell for a third straight month in January, a government agency said Tuesday. Home prices fell 0.3% on a seasonally adjusted basis in January compared with December, according to the Federal Housing Finance Agency's monthly home-price index released Tuesday. It was the third straight month of declines.
Earlier in the week, the National Association of Realtors reported that sales of existing homes in February dropped 9.6% from a month earlier, and the median sales price of $156,100 was the lowest since February 2002. Prices are falling because of the large amount of foreclosures and other distressed properties hitting the market.
While lower prices mean homes are becoming more affordable, an extended decline can fuel the market's woes as consumers hold off for a better deal.
A survey of 111 economists and other housing analysts released this week by MacroMarkets LLC found that analysts expect U.S. home prices won't hit bottom until next year. The analysts, on average, expect home prices as measured by the Standard & Poor's/Case-Shiller national index to fall 1.4% in 2011.
The survey was conducted during the first two weeks of March. Last June, economists polled in the same survey expected prices would rise by 1.3% this year.
Already, a large supply of unlisted bank-owned homes and potential foreclosures sit on the horizon, a "shadow inventory" that could push down prices even more. Those discounted homes make it difficult for builders to compete.
The number of new homes for sale at the end of February was unchanged at 186,000, a supply that would take 8.9 months to deplete at the current sales rate. A six-month supply of new homes is considered healthy. The supply in January was 7.4 months.
The Commerce report said new-home sales last month fell in all four regions, including a 57.1% drop in the Northeast and a 27.5% decline in the Midwest. Sales also fell 14.7% in the West and 6.3% in the South.
"We continue to expect the recovery in housing to be disappointingly and frustratingly slow," RBS economists said in a note to clients. "Progress in the sector continues to be characterized as "one step forward, one step back.'"
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