Tuesday, February 28, 2006

New Home Sales Fell in January

Lower Existing Home Sales

I don't think that mortgage rates have to be higher relative to where they are now to cause people to stop buying houses. Rates are low today by historical standards and we are seeing a meaningful decrease in sales anyway. It looks like prices keep going up on a year-over-year basis, but are flat sequentially. By the summer we should start to see the first negative year-over-year price comparisons.

From today's Wall Street Journal (subscription required)

New-home sales fell in January and the number of unsold homes on the market rose to nearly a 10-year high, signaling continued cooling in the housing market.

The Census Bureau said sales of new single-family homes dropped 5% last month to an annual rate of 1.23 million units, the slowest pace in a year. Slower sales and rising inventories pushed the number of unsold homes up 2.5% in January to 528,000, a 5.2-month supply. That is the highest level of unsold new homes on the market in nearly a decade.

Many economists were surprised by the January decline, having anticipated that unseasonably warm weather last month would boost sales, much as it had stimulated big jumps in housing starts, retail sales and construction. Instead, sales in the Northeast, South and Midwest all dropped more than 10% from December, overshadowing an 11.3% rise in the West. Rising interest rates and lower levels of mortgage applications in recent weeks have further darkened the outlook.

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