The median price is also falling — another sign realty market is cooling
Martin Crutsinger
Sun
WASHINGTON — U.S. new-home sales plunged in February by the largest amount in nearly nine years, while the median price of a new home dropped for the fourth straight month — providing fresh evidence that the once-booming housing market is cooling off.
The Commerce Department reported that sales of new single-family homes dropped by 10.5 per cent last month to a seasonally adjusted annual sales pace of 1.08 million homes.
It was the second-straight monthly decline and was much bigger than the two per-cent dip that Wall Street was expecting.
The drop in new home sales followed news Thursday that sales of previously owned homes actually rose by a stronger-than-expected 5.2 per cent last month following five straight monthly declines.
Analysts said the trend in both reports pointed to a slowing housing market after five record-setting years.
The slowdown in sales was putting pressure on prices. The median price of a new home sold last month dropped to $230,400 US, down by 1.6 per cent from January and off 2.9 per cent from February 2005. The median is the mid-point where half the homes sold for more and half for less.
The slowdown in the U.S. housing market could spill over into Canada and reduce shipments of lumber sold to the U.S. homebuilding industry.
In recent years, the torrid growth in U.S. housing starts has benefited Canadian forestry companies and kept their exports strong, even though they were forced to pay punitive duties because of the softwood lumber dispute with the United States.
In other economic news, orders to U.S. factories for big-ticket manufactured goods rose by 2.6 per cent last month, the biggest gain since November, reflecting a surge in demand for commercial aircraft.
Outside the volatile transportation sector, orders actually fell by 1.3 per cent, but economists said the underlying trend for manufacturing remained strong.
The 10.5 per-cent drop in new home sales in February followed a 5.3 per-cent decline in January and was the biggest drop since a similar 10.5 per-cent fall in April 1997.
Sales of new homes have fallen in four of the past five months with the sales rate of 1.08 million units the slowest pace since May 2003.
While sales of both new and existing homes climbed to new all-time highs in 2005, the fifth consecutive annual records, analysts believe sales will decline this year as the housing boom slows under the impact of rising mortgage rates.
By sector of the country, sales fell by the largest amount last month in the West, a drop of 29.4 per cent. Sales were also down in the South, dropping 6.4 per cent. Sales rose in the Northeast by 12.7 per cent while sales in the Midwest were up by 5.2 per cent.
The slowdown in sales pushed the inventory of unsold homes up to a record of 548,000 at the end of February. At the February sales pace it would take 6.3 months to sell all of the homes on the market, up from 5.3 months in January.
Analysts say he growing backlog of unsold homes will start to put more pressure on home sellers to reduce prices in the months ahead.
© The Vancouver Sun 2006