New home sales drop 11.2% in January
By: Danelle
New-home sales dropped an eye-popping 11.2% in January to 309,000 units, the lowest ever since they started keeping track. That was sharply below the anticipated rise to around 350,000 by Wall Street's fearless forecasters and, just to give you a glimpse of how the mighty have fallen, it's about a million and a quarter fewer sales than at the peak in the heady days of midsummer 2005.
To make matters worse, the median home sold for $203,500, almost a seven-year low, and inventories rose to 9.1 months, which, given the so-called shadow inventory of unsold houses the banks are sitting on, does not, to put it mildly, bode well for housing in general and the home builders in particular. Nor does the sharp decline in mortgage applications and the uptick on 30-year mortgage rates to over 5%.
Existing-home sales took a dive in January as well, to an annual rate of 5.05 million, a 7% drop and quite a cut below Wall Street expectations of 5.5 million. That was the second-biggest decline (after December's awesome 16.2% skid) in the 11 years such data have been collected. The median price held level with a year ago at $164,700, but necessitous sales accounted for a formidable 38% of the total.
Obviously, for investors, home builders and distressed homeowners, the pain inflicted by limp housing won't be over until it's over. And until it is, we have trouble envisioning anything resembling a robust rebound by the economy.
