New home sales pace slowest in seven years
The country's one bright spot: the West, where sales were up almost 25 percent.
Published March 27, 2007
WASHINGTON - Sales of new homes fell sharply for a second consecutive month in February, a weaker-than-expected performance that dimmed hopes for a rebound in the troubled housing market.
The Commerce Department reported Monday that sales of new single-family homes fell by 3.9 percent last month to a seasonally adjusted annual rate of 848,000, the slowest sales pace in nearly seven years. All regions of the country except the West experienced weakness last month.
The February decline followed an even larger drop in sales - 15.8 percent - in January, which had been the largest one-month plunge in 13 years. The back-to-back declines provide evidence that the housing market is continuing to struggle with lagging demand and a glut of unsold homes.
The weakness in sales pushed the median price of a new home down to $250,000 in February, a drop of 0.3 percent from a year ago. It marked the second straight month that the median price fell compared with the same period a year ago. The median is the point where half the homes sold for more and half for less.
By region of the country, sales were up 24.6 percent in the West, a rebound after a 25.8 percent plunge in January.
However, every other region showed weakness last month, led by a 26.8 percent drop in sales in the Northeast and a 20 percent decline in the Midwest, two areas which experienced a series of winter storms. Sales also fell in the South, dropping by 7 percent.
The performance of new home sales was in contrast to a report last week that sales of existing homes rose in February by the largest amount in nearly three years.
The back-to-back declines in the new home market served to support the forecasts of private analysts who believe the slowdown in housing has more months to run its course.
The housing bust is coming after a housing boom in which sales of both new and existing homes set records for five straight years.
Some analysts see the current slowdown as a correction from a period of speculative frenzy in which investors were buying second homes in hopes of reselling them quickly to make profits on the double-digit gains in prices in the hottest sales areas in the country, including Florida and California.
For February, the number of unsold homes rose by 1.5 percent to 546,000. That meant it would take 8.1 months to sell all of those homes at the February sales pace, up from 7.3 months in January.
The problems in housing are being increased by spreading financial difficulties with mortgage lenders who specialized in the subprime market, where borrowers with weaker credit histories could qualify for mortgages.