New-Home Sales Bulldozed

It still costs more to buy new than used: The Commerce Department said that the median sales price of new homes sold in January was $239,800, down 2.1% from a year ago; the average sales price was $313,000.

The plunging new-home figures were themselves a contrast to expectations -- this is hard to figure, since sales have been slumping long enough that the trend is pretty evident. But most economists had not expected annualized sales to dip below the 1 million mark for the month. Last October's number was 967,000, but the last time the figures dipped below this January's tally was in February 2003.

December's sales may have gotten a lift from the warmer temperatures that prevailed then; conversely, we may see darker numbers in February after the brutal weather that has enveloped much of the nation.

One positive note: New construction is also down. The number of homes being built hit 277,000 in January, a significant drop from the May peak of 336,000.

The new-construction slowdown is important because it signals that homebuilders have -- as they should -- put on the brakes to work through their overstock.

Bernard Markstein, director of forecasting for the National Association of Homebuilders, says his group isn't too dismayed by the January numbers. "Our view is that the demand side is stabilizing, and though these numbers are a little disappointing, they don't undermine that view."