New-home sales fall to record low

NEW YORK (CNNMoney.com) -- Sales of new homes fell to a record low in February, according to a government report released Wednesday, as the glut of foreclosed homes and a weak economy dampened the housing market.

New-home sales fell 2.2% to a seasonally adjusted rate of 308,000 last month, compared to a upwardly revised annual rate of 315,000 in January, the Census Bureau said.

It was the lowest rate since the government began keeping records in 1963 and marked the fourth straight month of declines.

A consensus of economists surveyed by Briefing.com expected February sales to rise to an annual rate of 315,000.

New-home sales were down 13% from February 2009.

New-home sales fell in every region of the United States, except the West region, which saw a 20.8% jump in new-home sales. The Northeast was hardest hit, with a 20% decline in February.

"Weather had something to do with declines in the Northeast and Midwest," which took the brunt of the winter storms in February, said Stuart Hoffman, chief economist at PNC Financial Services Group. "But this is still a weak level of buying to start the year."

The Census Bureau data followed a report from the National Association of Realtors on Tuesday that showedexisting home sales slipped in February, as the housing market continued to struggle with a gradual recovery of demand and a glut of inventory.

What's driving the market: A stubborn job market kept pressure on the housing market.

The U.S. unemployment rate stood at 9.7% last month, after unexpectedly falling in January, suggesting that the economic recovery could be gaining steam.

But "the economy, while recovering, is still not full speed ahead," said Hoffman.

Although foreclosures showed signs of stability in February, they were still up 6% from last year. Growth in "distressed properties," which tend to be priced well below market, detract from the purchase of new homes, which averaged $282,600 last month, according to the report.

Inventory and prices: The Census Bureau estimated that 236,000 new homes hit the market in February.

At the current sales rate, it would take 9.2 months to sell through that inventory. This is up from 9.1 months of inventory in January. Prior to January, inventory was steadily declining.

In November, Congress extended and expanded an $8,000 tax credit for first-time homebuyers, which also allows some repeat buyers to qualify for a $6,500 credit. Buyers have until April 30 to qualify for the credit.

New-home sales saw a surge of activity when homebuyers thought the November tax credit would expire, but retreated after the extension.

Although February's data was "a bit disappointing," Hoffman says the real test will come during peak homebuying season in the spring.

"The real story will be if no one knocks at the door for a new-home in an environment of record low mortgage rates, a homebuyer's tax credit and a recovering economy," said Hoffman. "If they don't, then it's lights out."