US new home sales plunge to record low

City A.M. Reporter
New US single-family home sales unexpectedly fell in February to hit a record low and prices were the lowest since December 2003, in signs of a deepening housing market slide.

Sales dropped 16.9 per cent to a seasonally adjusted 250,000 unit annual rate, the lowest since records began in 1963, after an upwardly revised 301,000-unit pace in January, new data from the Commerce Department has shown.

Sales plunged to all-time lows in three of the four regions last month. Economists polled by Reuters had forecast new home sales edging up to a 290,000-unit pace last month from a previously reported 284,000 unit rate.

"It's been a disappointing February for home sales and there are no signs of a turnaround," said Kurt Karl, chief US economist at Swiss Re in New York.

"We're going to have a continuing slowdown in the next few months, but people will start to feel better in the second half of the year and construction and sales should do better later this year and into next year."

U.S. stock indexes fell on the data, while government debt prices rose marginally. The dollar was little changed.

Compared to February last year sales were down 28 per cent.

An oversupply of homes exacerbated by an increasing flood of properties falling into foreclosure is frustrating recovery in the housing market. Data on Monday showed a steep drop in sales of previously owned homes in February, with prices tumbling to a near nine-year low.

The median sales price for a new home also plunged 13.9 per cent last month to $202,100, the lowest since December 2003.

Compared with February last year, the median price fell 8.9 per cent. Persistent price declines could dampen hopes of a pick-up in sales during spring.

In the face of stiff competition from foreclosed properties, which typically sell well below market value, builders are holding back on new construction.

At February's sales pace, the supply of new homes on the market rose to 8.9 months' worth, the highest since August, from 7.4 months' worth in January.

There were 186,000 new homes available for sale last month, matching the prior month's inventory. That was still the smallest supply of home since 1967.

New home sales account for less than ten per cent of overall sales.