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.

New home sales: Down 80% from the boom

By Les Christie, staff writer

NEW YORK (CNNMoney.com) -- Don't look to the new home market for glad economic tidings: Home builders had another dismal sales month in October, falling to just one-fifth of the sales rate during the boom five years ago.

New home sales dropped to an annual pace of just 283,000, according to the Commerce Department. That was down 8.1% from a slow September and 28.5% from 12 months ago when the annualized sales rate was at 430,000.

Housing experts from Briefing.com had forecast a sales pace of 314,000.

"The new home market delivered another turkey of a performance last month," said Mike Larson, a housing market analyst with Weiss Research. "Sales fell sharply across most of the country."

Sales are off nearly 80% from the housing boom peak pace of 1.4 million, set in July 2005. Sales have remained near historic lows this year despite very attractive mortgage interest rates that slash the monthly costs of homeownership.

The Commerce Department also revised August sales figures downward to 275,000, which represents the record low point for new homes sales since it started tracking figures in 1963.

There's a major factor depressing home sales of all kinds, according to David Crowe, chief economist for the National Association of Home Builders.

"We're fallen significantly in the number of people forming their own households," he said. "They're worried about the economy and they're worried about their jobs."

Usually, household formation rises 1% a year or more as people get married, come to the states from overseas, and start careers.

But the poor economy has meant that many grads can't find jobs, and so they move in with parents instead or double up with peers. Fewer immigrants arrive and couples delay marriage. All of those things diminish home sales.

When people do look for homes, they find a glut of existing homes competing with new homes for sale, according to Larson.

"So much bargain-priced, 'used' home inventory is available that the builders just can't compete," he said. "Over time, we'll work through that mountain of existing home supply. But the key words are 'over time.' New home builders won't have much to be thankful about any time soon.

The median price for existing homes sold in October was just $170,000, compared with $194,900 for new homes. That's the lowest median price for new homes sold in seven years and down 13.9% from September.

Crowe said that indicates many of the buyers were first timers. They're less constrained than older potential buyers because they don't have to worry about selling their existing homes in order to purchase new ones.

Another obstacle for buyers is that there are still challenges in obtaining mortgages, according to Leif Thomsen, CEO of Mortgage Masters, a mortgage lender.

"A lot of potential buyers just can't get financing," he said. "The underwriting is very strict."

One encouraging aspect of the report for home builders is that inventory continued to wane. The number of new homes for sale at the end of October was about 202,000, less than nine months' supply at the current rate of sales. The number of homes on the market has dropped about 20% since October 2009.

"The builders have been smart enough to not overbuild," said Thomsen. "Once the economy turns around, that inventory could vanish quickly." To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.82%3.93%
15 yr fixed2.98%2.99%
5/1 ARM3.13%3.28%
30 yr refi3.91%3.98%
15 yr refi3.08%3.06%
Rate data provided
by Bankrate.com
View rates in your area
Find personalized rates:
  • Find Homes for sale
    Real estate and homes for sale on Trulia

  • Property Type
  • Find a home in: New York | Atlanta | Chicago | Los Angeles
  • Washington D.C | Houston | Philadelphia | More options
Index Last Change % Change
Dow 17,824.18 104.26 0.59%
Nasdaq 5,134.42 25.75 0.50%
S&P 500 2,092.41 12.00 0.58%
Treasuries 2.15 -0.07 -3.07%
Data as of 1:56pm ET
Company Price Change % Change
Bank of America Corp... 17.57 0.14 0.82%
General Electric Co 29.90 -0.04 -0.12%
Pfizer Inc 33.41 0.64 1.95%
Microsoft Corp 54.78 0.43 0.79%
Freeport-McMoRan Inc... 8.21 0.03 0.37%
Data as of 1:41pm ET


Microsoft is enjoying a renaissance under the leadership of CEO Satya Nadella. The cloud strategy is paying off and the stock is not far from its all-time highs. But now comes the hard part .. living up to the hype. More

Strong November U.S. car sales has industry poised to set a record for sales once December results are reported. More

Microsoft is enjoying a renaissance under the leadership of CEO Satya Nadella. The cloud strategy is paying off and the stock is not far from its all-time highs. But now comes the hard part .. living up to the hype. More

Hive, a startup funded by the UN, is tasked with getting more Americans engaged with the refugee crisis. More

Have you heard of Harvey Mudd College? A degree from this small liberal arts school can cost more than a house, but grads earn about $92,300 a year after getting their degree. Google hired 11 Mudders last year. More