New home sales fell in January to their lowest level since June 2000, possibly offering a sign of weakness in what has been a very strong market throughout the economic downturn. Still, most experts seemed willing to wait for longer-term data before drawing any conclusions about the health of the housing sector.
Sales of new homes tumbled 14.8% to a seasonally adjusted rate of 823,000 units in January from a seasonally adjusted pace of 966,000 in December, the Commerce Department said on Wednesday.
The South had the biggest decrease in new home sales, which fell 22% to 353,000 units from 453,000 units. "Only the South experienced a really low level of sales," said Joel Naroff, president of Naroff Economic Advisors, an economic consulting firm based in Holland, Pa. "I don't know whether this is an aberration, or if there is a trend developing."
In the meantime, Naroff was willing to take a wait-and-see approach about Wednesday's news. "I'm not coming to a conclusion about the report yet, but it's obviously a red flag," he said.
The second-largest drop was in the West, where sales fell 17% to 235,000 units from 283,000 units. The consensus estimate called for total new home sales of 950,000 units in January.
Peter Kretzmer, chief economist at Bank of America, wrote in a research note that economic trends contributed to the decline. "New home sales tend to be rather volatile from month to month, but rising mortgage rates -- which have subsequently been reversed -- and slower employment growth likely played some part," he wrote.
The weak new home sales data follows a strong existing home sales report earlier this week. Sales of previously owned homes jumped 16.2% to a record annual rate of 6.04 million units in January.
The difference between the two reports also may have to do with the way they are calculated. New home sales are recorded when a contract is opened, while existing sales are tallied when a contract is closed.
"New home sales often lead existing home sales by a month," said Christopher Low, an economist at First Tennessee Capital Markets, who said the report may just be a pullback from unusual strength.
Shares of several major homebuilders hit 52-week highs earlier in the session, but in recent trading, they were lower.
was off 82 cents, or 1.6%, to $50.22, while
was lower by 27 cents, or 0.7%, to $38.92.
was off $1.48, or 2.6%, to $54.70.
M/I Schottenstein Homes
was losing 90 cents, or 1.5%, at $57.65.
"The good news for the homebuilders is they anticipated a collapse, which never came," Low said. "So the supply of new homes is low compared to prior economic recovery periods."
But the bad news is, "there is going to be a pullback from last year's levels," he added.
-- which Tuesday reported much better-than-expected first-quarter results and suggested it was
immune to the recession -- was down 24 cents, or 0.5%, to $47.01.