Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Real Estate

New home sales hit 13-year low

There are more signs of housing weakness, as sales slip despite a big dip in prices.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By David Goldman, CNNMoney.com staff writer

New home sales hit a 13-year low despite falling prices, according to a Census Bureau report.
Which candidate is best suited for fixing the economy?
  • Hillary Clinton
  • John McCain
  • Barack Obama

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.

Prices still falling

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.

More trouble

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." To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
The 10 best states for retirees It might be worth moving to a new place to find your dream retirement home. Check out these 10 states. More
A look at Sears through the years Now Sears has officially said its business has an uncertain future, here's a look at photographs that documents the store's rich history. More
Coolest hotel bars for business travelers in 2017 CNNMoney asked a high-end concierge service for routine business travelers what hotel bars they'd recommend in 4 major U.S. cities. Here are the best spots. More