In case anyone was feeling lulled into positive territory by yesterday's report of gains in existing-home sales, today's numbers on new-home sales will have knocked them out of their easy chairs.
Notching their biggest percentage decline in 13 years, new-home sales in January cannonballed just more than 20% year over year to their lowest level in four years, according to figures released by the Commerce Department. The annualized sales figure of 937,000 was a 16.6% decline from December's 1.17 million sales rate.
The news was in stark contrast to yesterday's relatively positive report from the National Association of Realtors, which said that existing-home sales had risen 3% in January over December, posting the biggest percentage gain in two years. Still, sales fell 4.3% from year-ago levels, with single-family resales up 3.5% and condo sales down a slight 0.1%, or an annual rate of 767,000.
The backlog of unsold homes bumped up nearly 3% to a 6.6-month supply, the highest since last October, when inventories stood at 7.2 months. Inventories of completed but unsold new homes, a sub-category of the seasonally-adjusted total of 536,000 (construction not started, under construction and completed), stood at 175,000, representing a 47% jump over a year ago.
Yet the existing-home sales figures provided more evidence that sellers are starting to move their markers: The median sales price was down 3.1%, to $210,000.
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."
Assuming the builders can keep themselves in check, he says, perhaps optimistically, "we expect by late spring, early summer that the demand and supply sides will be in balance and we'll see improvement on those starts numbers."
Yet another move that could dampen home-buying activity was
announcement on Feb. 27 that it is tightening the screws on subprime mortgages, in a move to raise underwriting standards and screen out problem borrowers before they receive loans.
It's a welcome move but one that should have been made at least two years ago. Concerns that clamping down on irresponsible lending will somehow be detrimental to the economy can be allayed by a quick look at last month's news out of
, which is facing billions in losses on subprime lending. Slowing down an overheated engine is usually a good thing.
Slatin publishes the independent real estate newsletter theslatinreport.com. He has written extensively about real estate and architecture for publications ranging from Barron's to The New York Times, and is on the editorial board of Real Estate Portfolio, published by the National Association of Real Estate Investment Trusts. He was the founder and editor of Grid, an award-winning real estate business magazine.