Sales of new single-family homes fell 3.9 percent in February to a seasonally adjusted annual rate of 848,000, the lowest level since August of 2000, according to figures released by the U.S. Commerce Department. The February fall-off followed downward revisions to the sales rates for the three previous months.
“The decline in home sales reflects what builders are telling us,” said Brian Catalde, president of the National Association of Home Builders (NAHB). “Our recent builder surveys show a decline in builder sentiment in early March, associated with serious concerns about how the subprime-related shakeout in the mortgage market will affect the housing sector. Today’s numbers suggest we are already seeing serious effects on the lending side.”
“Lending standards apparently are tightening not only in the subprime market but in other components of mortgage lending as well, and this is creating tremendous uncertainties regarding the near-term outlook for home sales and housing production,” said NAHB Chief Economist David Seiders. “The Federal Reserve’s recent statement that there is an ongoing adjustment in the housing sector appears right on target.”
Seiders added that the decline in new-home sales is troubling particularly in view of supportive economic fundamentals – job growth and household income are solid and the interest rate structure remains quite favorable. Furthermore, the weakening is occurring despite improving affordability conditions in the marketplace, improvements in consumers’ assessments of home buying conditions, and ongoing efforts by builders to reduce inventories by cutting prices and offering other sales incentives.
“While there was some weather-related impact on both the January and February sales numbers, it is obvious that the weakness is more fundamental, and this apparently can be traced to the mortgage market,” said Seiders. “Housing is a credit-dependent sector and a broad-based tightening of mortgage lending standards certainly does not bode well for families seeking to buy homes.”
Three out of four regions posted declines in new-home sales in February. Sales were down 26.8 percent in the Northeast, 20 percent in the Midwest and 7 percent in the South. Seiders noted that the 24.6 percent gain in the West is largely attributable to an unusually low reading in January.
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