NEW YORK (CNNMoney.com) -- Sales of new homes plunged to a record low in January, government figures showed Wednesday, as the weak economy and a glut of foreclosed homes continue to weigh on the market.
The seasonally adjusted annual rate of new home sales plummeted 11.2% to 309,000 last month, compared with a revised rate of 348,000 in December, the Census Bureau said. That's a decline 6.1% from January 2009.
It was the lowest rate since the government began keeping records in 1963 and comes after declines in November and December.
The drop surprised many industry analysts. A consensus of economists surveyed by Briefing.com had expected January sales to rise to an annual rate of 354,000.
"Some people were expecting a surge in demand because of the tax credit," said Patrick Newport, an economist at IHS Global Insight. "But that surge isn't materializing."
Congress extended a popular tax credit last year that allows first-time buyers to deduct up to $8,000 from their income taxes and some repeat buyers to get a $6,500 break. Buyers now have until April to apply for the credit, which helped boost new home sales from depressed levels last year.
New home sales fell in all U.S. regions except the Mid-west, where sales edged up 2.1%. The Northeast was the hardest-hit last month, with sales plunging more than 35%.
What's driving the market: The market for new homes remains pressured by a glut of foreclosed properties and high unemployment.
"Distressed inventory continues to hit the market at cut-rate prices, drawing potential buyers away from new product," said Mike Larson, real estate analyst at Weiss Research. "And let's face it, the job market is nothing to write home about, either."
An industry report released earlier this month showed that foreclosures dropped nearly 10% between December and January, while filings rose 15% compared to a year ago.
Meanwhile, the U.S. unemployment rate fell unexpectedly in January to 9.7%. But the nation has lost 8.4 million jobs since late 2007, suggesting an economic recovery will be slow and uneven.
"I still think we're on the long, slow road to an anemic, lackluster recovery in housing," Larson added. "But numbers like these can sure shake your faith."
Inventory and prices: There were an estimated 234,000 new homes for sale at the end of December, according to the report.
At the current sales rate, it would take 9.1 months to sell through that inventory. That's up from December, when there were 8.1 months of inventory on the market. Prior to December, inventory levels had been steadily declining since May 2009.
Adam York, an economist at Wells Fargo, said the inventory of new homes for sale appears to be leveling off near 235,000 units.
"This is well below the level that persisted for most of the 1990s," he said, "suggesting builders have moved most of their excess inventory and will be in a better position when sales do eventually recover."
The median price of new homes sold in January was $203,500, down from $221,300 in the previous month. The average sale price was $254,500.
Outlook: Some economists expect new home sales to improve as the number of foreclosed properties on the market decreases and buyers take advantage of the tax credit.
"The supply of foreclosed homes has tightened," said Celia Chen, a senior director at Moody's Economy.com. "I think by early spring, home sales will pick up because buyers will want to take advantage of the tax credit."
IHS Global Insight's Newport said he also expects sales to pop this spring. However, he may reduce his full year forecast for new home sales in light of Wednesday's report.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.80%||3.88%|
|15 yr fixed||3.20%||3.23%|
|30 yr refi||3.82%||3.93%|
|15 yr refi||3.20%||3.23%|
Today's featured rates:
Land O'Lakes CEO Beth Ford charts her career path, from her first job to becoming the first openly gay CEO at a Fortune 500 company in an interview with CNN's Boss Files. More
Honda and General Motors are creating a new generation of fully autonomous vehicles. More
In 1998, Ntsiki Biyela won a scholarship to study wine making. Now she's about to launch her own brand. More
Whether you hedge inflation or look for a return that outpaces inflation, here's how to prepare. More