WASHINGTON (MarketWatch) — Sales of new homes in the U.S. fell slightly in February — the fourth straight monthly drop — to a record low despite an extension of a federal tax credit meant to attract buyers.
New-home sales slipped 2.2% to an
annual pace of 308,000, seasonally adjusted, which is the lowest rate since the government began tracking the data in 1963, according to the Commerce Department. The rate of sales is down 13% compared February 2009.
Economists surveyed by MarketWatch forecast annualized sales of 318,000.
Tougher lending standards and a lack of job security — the U.S. unemployment rate is 9.7% — could be discouraging prospective buyers in a weak economy. And if they expect home prices to fall further, they might wait even longer before closing a sale, analysts say.
To some extent, poor weather in early 2010 may also hurt home sales, though a downward trend has been evident since last fall.
“We can cite the weather but Mother Nature can’t be entirely blamed for this report,” economist Jennifer Lee of BMO Capital Markets said in an email.
Sales for January were revised to a seasonally adjusted annual rate of 315,000, up from 309,000 as previously reported. Sales are recorded once a contract is signed, not at closing. Some homes are sold before building is underway.
The number of new homes on the market rose 1.3% in February to 236,000. At February’s rate of sales, it would take 9.2 months to sell all the inventory, compared to 8.9 months in January and 7.3 months last October. Read the full government report.
Since the information collected by the federal government is not always reliable month to month, data for new-home sales are prone to large revisions. Because of such glitches, the Commerce Department says it can take up to five months to establish a statistically significant trend in sales.
In the five months from February 2010 back to October 2009, the sale of new homes fell to a seasonally adjusted average of 346,000 from 363,000 – further evidence of weaker housing market.
Although sales of new homes rose modestly in the first half of 2009, they leveled off last fall despite low interest rates and cheap prices. Nationwide, houses cost 75% or less compared to just three years ago.
Many economists thought an extension of a tax credit for first-time buyers until April 30 would lift new-home sales, but there’s not much evidence so far. Buyers could still take advantage of the tax credit in the next two months and boost demand, but the housing market is likely to remain subdued throughout 2010.
“Going forward, we don’t expect housing to rise at a blistering pace, though it is likely not to fall off a cliff either,” strategist Ian Pollick of TD Securities said in an email.
Builders cautious
Since fewer people are buying homes, builders have scaled back new construction. In February, the number of homes for sale that are under construction inched up to 102,000. It matched a record low of 101,000 in January.
The inventory of unsold homes, meanwhile, totaled 236,000 in February – barely above a 38-year low. Lean inventories reflect a weak housing market; contractors build more homes when times are good.
If a home isn’t sold before it’s finished, an average sale takes 14.4 months to complete, the government reported. That’s also a new record.
Slack demand for new homes, especially expensive dwellings, has pushed prices lower. Yet the median price of a new home sold actually shot up 6.1% to $220,500 in February from January’s revised level of $207,900. It’s still 5% lower compared to one year ago, however.
Fully 43% of the new homes sold for under $200,000 in February, compared to 45% in January. Four years ago, only 35% of all new homes sold for under $200,000.
The biggest drop in sales took place in the Northeast, which experienced a 20% decline. New-home sales also fell in the Midwest (-18.0%) and the South (-4.6%). All of those areas experienced major snowstorms in January or February.
Sales rose 20% in the West, the hardest hit housing market in the U.S., according to government data.
