New-Home Sales Falter

Sales fall 5% in January as inventory reaches the highest level in nearly 10 years.
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Sales of new single-family homes in the U.S. fell 5% in January, and the amount of unsold inventory rose to the highest level in nearly 10 years, the Commerce Department said Monday.

Sales in January were at a seasonally adjusted annual rate of 1.233 million, down from 1.298 million in December and up slightly from 1.194 million a year ago. Economists expected a rate of 1.26 million sales, according to Reuters.

The median sales price of new houses sold in January was $238,100, up from $229,000 in December. The total number of new houses for sale at the end of January was 528,000, representing a 5.2-month supply based on the current sales rate. The supply figure represents the highest level since the autumn of 1996.

However, the inventory number looks less worrisome when the number of homes for sale is broken down into completed and uncompleted units, says Phillip Neuhart, a Wachovia economic analyst. Completed homes for sale represented 22% of the overall inventory in January, compared with 24% a year ago, which shows the market is not being overly flooded with empty houses.

From December to January, sales fell 14.9% in the Northeast, 10.8% in the Midwest, and 10.3% in the South. In the West, sales rose 11.3%.

Neuhart says the new-home sales data are a better reflection of the housing market these days than the recent

strong housing-start numbers, which came in higher than expected because of the very warm January.

"It's really showing what's going on there -- with mortgage applications and what we're hearing anecdotally ... that things are slowing a bit," he says.

Homebuilders fell on the new-home sales data, with the Philadelphia Housing Sector Index dropping 1.25% in early trading.

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