Volatile new-home sales fall 16.6% in January

Wednesday, February 28th, 2007

Warm weather helps homes sales bounce back in January

Christine Dugas
USA Today

WASHINGTON (Reuters) — Sales of new homes fell 16.6% in January and prices were little changed as the number of new homes on the market decreased slightly, according to a government report Wednesday showing more weakness in the unsteady housing sector.

The monthly decline was the sharpest in 13 years, since a 23.8% drop-off in January 1994.

New single-family home sales fell to an annualized rate of 937,000 units from an upwardly revised rate of 1.123 million units in December, the Commerce Department said.

Analysts polled by Reuters were expecting January sales to dip to 1.080 million from the previously reported rate of 1.120 million units in December.

In January, the median sales price of a new home rose $400 to $239,800 from $239,400 in December.

At the current sales pace, the supply of new homes available for sale rose to 6.8 months’ worth from the 5.7 months’ worth in December, which represents a 19.3% increase. There were a total of 536,000 new homes available for sale at the end of January, down 0.2% from December.

The Commerce Department’s data comes a day after a Realtor trade group reported a stronger-than-expected month of existing home sales. The sales pace of previously owned homes rose 3.0% in January, the biggest jump in two years, the National Association of Realtors said.

Home resales, which represent 85% of the housing market, climbed to a 6.46 million-unit annual rate.

Across the regions, the West saw the sharpest decline in new-home sales with a 37.4% drop. In the Northeast, new-home sales fell 18.7% while they decreased 8.1% in the Midwest and 9.7% in the South.

Warm weather helps homes sales bounce back in January

Home sales rebounded in January, reaching the highest level in seven months, the National Association of Realtors said Tuesday.

The warm winter weather helped boost sales, which rose 3%. And single-family homes showed the biggest sales increase, rising 3.5%. But existing condominiums and cooperative housing sales slipped 0.1%. Those sales are stagnant because many more condos and co-ops are available, the NAR says.

Despite the dramatic rise in home sales in January, no one should overreact to the gain, analysts say. “I’m trying to be careful because we could see the next month down a little,” says David Lereah, the NAR’s chief economist.

The reason: February winter storms disrupted much of the country, which could cause a near-term home sales dip.

While sales jumped in January, there was still a downturn in existing home prices. Last month, prices fell 3.1% from January 2006 to $210,600. And the price softness is expected to continue until spring, Lereah says.

“But that may not be that bad,” says Joel Naroff, chief economist of Naroff Economic Advisors. “The decline in prices is helping sales, but we still have too many homes for sale.”

The inventory of homes for sale rose 2.9% at the end of January to 3.55 million. That represents a 6.6-month supply. Still, that’s down from the 7.4 month peak in October.

Some owners may remove their homes from the market because of the additional decline in home prices, Naroff says. It also may spur more offers.

Across the USA, existing home sales in January improved the most in the West, while sales in the Northwest were unchanged.

And among states and cities, recent sales have varied. For example, in Florida, sales fell 27% in January. But Long Island, N.Y., Boston, Pittsburgh and most of New Jersey had solid gains in home sales.

Many experts hope that home sales will continue to improve.

“First-time home buyers are now in a position that they can take their time, and they’re being able to purchase homes,” says Bill Hanley, president of the New Jersey Association of Realtors. Instead of 10 buyers for every home, there are now 10 homes for every buyer, he says. At Hanley’s firm, Weichert Realtors in Metuchen N.J., January home sales more than doubled the sales in January a year ago.

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