New-home sales plunge 8.3% to seven-year low
- Sales of new homes dropped 8.3% in August to a seasonally adjusted annual rate of 795,000, the slowest sales since June 2000, the Commerce Department estimated Thursday.
Sales are now down 21.2% in the past year, with no sign of a bottom in the crippled housing market.
August's sales pace was weaker than the 825,000 expected by economist surveyed by MarketWatch. In addition, sales in May, June and July were revised down.
The sales figures do not account for canceled sales contracts.
The median sales price fell 7.5% to $225,700 in August compared with a year earlier, the largest year-over-year decline in 37 years. The median price can be affected by the mix of homes sold between and within regions, and the price does not include nonmonetary incentives, such as upgrades, free vacations and new cars.
The inventory of unsold homes fell by 1.5% to 529,000, the fifth straight decline as builders struggle to bring their inventories down. The inventory represents an 8.2-month supply at the August sales pace, the highest since March.
The number of completed homes that have not yet sold rose 1.1% to 180,000, the first increase since May.
On Tuesday, the National Association of Realtors said sales of existing homes fell to a five-year low in August, while inventories jumped to an 18-year high. See full story.
The data cover activity through the end of August, after the severe credit squeeze forced additional mortgage lenders out of business and made nonconforming mortgages, including jumbo mortgages, harder to obtain.
The government cautions that its housing data are subject to large sampling and other statistical errors. Large revisions are common. The standard error of 12.4% is so high, in fact, that the government cannot be sure in most months whether sales rose or fell.
It can take up to five months for a trend in sales to emerge. New-home sales have averaged 853,000 per month over the past five months, compared with 860,000 in the five months ending in July.
Home builders have piled on incentives, including offering free vacations and new cars, to sell homes and reduce inventories. Such incentives are not subtracted from the sales price reported to the government.
Sales are reported when a contract is signed, not at the closing of the sale. Home builders have reported a large increase in cancellations in recent months. Cancellations are not reflected in the government data, so the reported sales are likely overstated.
Sales rose 42.3% in the Northeast to 74,000 annualized and rose 20.5% in the Midwest to 135,000. Sales fell 20.8% in the West to 179,000 and fell 14.7% in the South to 407,000, the lowest in five years.
