Marking the slowest market conditions reported since January 1991, sales of newly built single-family homes declined 2.9% in November to a seasonally adjusted annual rate of 407,000 units, the U.S. Commerce Department reported recently.
“The fact that new-home sales continue to decline even in the face of substantial builder incentives, very favorable mortgage rates, and improved housing affordability shows how fearful consumers have become about making a home purchase in the current economic environment,” says National Association of Home Builders (NAHB) Chairman Sandy Dunn, a home builder from Point Pleasant, W.Va. “That's why it is absolutely necessary for the government to take action that will reassure home buyers and stimulate demand in order to help revive home sales and economic growth.”
According to NAHB Chief Economist David Crowe, these numbers indicate continuing downward momentum in home sales activity. “Sales of new homes are down 11.2% to date for the fourth quarter of 2008 compared to the third quarter. Meanwhile, our builder members are reporting worsening market conditions and sales expectations going forward, despite doing everything they can to get sales moving again and making progress in terms of reducing their inventories of unsold product.”
To counteract this grim reality, Crowe insists that more needs to be done. “Government interventions in the form of an enhanced home buyer tax credit and a mortgage-rate buy-down have worked before, and can work again, to reassure buyers, kick-start demand, and help turn the economy back in the right direction,” he says.
The inventory of new homes for sale declined for the 19th consecutive month in November to 374,000 units — from 402,000 units in October. The months' supply at the current sales pace declined to 11.5 from a revised 11.8 in October, which was a record high.
Regionally, new-home sales were mixed in November, with two regions posting gains and two posting declines. The Northeast and West each regained some ground, with 14.3% and 11% gains, respectively, while the Midwest and South posted declines of 16.4% and 7.1%, respectively. All four regions were down by more than 25% on a year-over-year basis.