New home sales hit 13-year low
There are more signs of housing weakness, as sales slip despite a big dip in prices.
NEW YORK (CNNMoney.com) -- New home sales fell to their lowest level in 13 years in February, according to a key government report on the battered housing market released Wednesday.
February sales came in at a seasonally-adjusted annual rate of 590,000, the Census Bureau report showed, down 1.8% from a revised 601,000 in January and down 29.8% from a year earlier.
"Home sales rates are declining steadily, which overall suggests that the housing market is still struggling," said Weiss Research real estate analyst Michael Larson.
Though home sales slipped, the reading was still above the consensus forecast of 580,000, according to economists surveyed by Briefing.com.
New home sales fell despite continued price declines. The median price of a new home sold in February was $244,100, down 2.7% from $250,800 a year earlier.
This decline in median price probably doesn't accurately capture the weakness in prices for new homes, since about three out of four builders have reported having to pay buyers' closing costs or offer other incentives, such as expensive features for free, in order to maintain sales.
"Falling prices are a double-edged sword," said National Association of Home Builders chief economist David Seiders. "Affordability of homes needs to be restored, but some prospective buyers stay away because they believe home prices will continue to go down further."
Prices have been driven down by the glut of new homes on the market.
Builders found it typically took 7.2 months to sell a completed home in the current market, according to the report.
The report showed 188,000 completed new homes available at the end of the month, bringing total inventory - including new homes under construction and not yet started - to 471,000. That equals a 9.8-month supply, which ties January for the highest supply since 1981.
Total inventory fell by 10,000 homes in the month, according to the Census Bureau, but the report does not include purchases that were cancelled and sent back to the builder.
"Inventories are still very high," said Seiders, who believes that inventories need to be whittled down to a five or six month supply to restore the balance to supply and demand.
The report is the latest sign of trouble in the overall housing market.
On Monday, the National Realtors Association reported existing home sales rose only slightly despite the largest year-over-year price drop on record since the group began reporting that measure in 1999.
On Tuesday, the Standard & Poor's/Case-Shiller Home Price 10-city index showed a record 11.4% annual drop in prices, the lowest level since the index's creation in 1987.
With aggressive rate cuts by the Federal Reserve, as well as other measures to help boost the mortgage market, the U.S. government has taken swift action to correct the slumping housing market.
Still, prices may continue to fall.
"Further price cutting into early 2009 will be needed to stabilize the market," said Larson. "If you're buying today, you have to look at staying in that home for the long term if you want to see an appreciation in value."