April 2007 News Update

National new-home sales fall sharply

New-home sales fell sharply in March, the second straight month of declines, and the weaker-than-expected performance dimmed hopes for a rebound in the nation's housing market.

The Commerce Department reported last month that sales of new single-family homes fell by 3.9 percent from January to a seasonally adjusted annual rate of 848,000, the slowest sales pace in nearly seven years.

While the Commerce Department doesn't break out data on local levels, the report did find that new-home sales in the West rose 24.6 percent in February from January.

Analysts said that the back-to-back monthly declines in new-home sales nationwide 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.

Declines in new-home sales were greatest in the Northeast and Midwest , which were battered by winter storms. In the past year, new-home sales fell 36.9 percent in the Northeast and 32.2 percent in the Midwest compared with the same period a year earlier. Sales also fell in the South, dropping by 17.1 percent, while sales in the West were off 5.7 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.

Analysts had expected new-home sales to increase in March as well, based on a view that January's steep plunge had overstated the weakness in housing.

The back-to-back monthly declines in the new-home market served to support the forecasts of analysts who say the slowdown in housing has more months to run its course.

The sales decline that has occurred over the past year has left a glut of unsold homes on the market, forcing builders to slash prices and offer incentives to attract buyers.

For February, the number of unsold homes rose by 1.5 percent to 546,000. That means 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.