Last Updated Apr 26, 2011 4:41 PM EDT
The continuation of sluggish housing sales isn't exactly a shock, but what caught economists unawares is the level to which new home sales have sunk. As it stands now, February is officially the lowest month on record for new home sales, and in conjunction, prices of new homes have returned to December 2003 norms.
Per figures released by the Commerce Department, new home sales decreased by 16.9 percent in February. As a nation, that puts the housing market on pace to move a mere 250,000 new units this calendar year. That's somewhat shocking!
Economists surveyed by Bloomberg News had been projecting a gain in new homes sales to a 290,000 unit sales rate. Clearly the experts were overly optimistic as builders struggle to compete with existing home sales and a boatload of foreclosures. The foreclosure crisis, which shows no signs of abating, is also adding significantly to the glut of unsold properties, and distressed properties are accounting for around 40 percent of home sales at the moment.
Why is this new home sales report significant?Simply put, new home sales are considered an accurate measure of the overall health of the housing market and the economy in general. These new statistics make it likely that land sales will be delayed. Builders will put off new construction as housing inventory builds. Wall Street won't be happy. That means jobs and income will be affected as well.
It's a vicious cycle that ultimately means industry observers and economists will once again announce that this month we've hit the bottom.
What do you make of the latest report from the housing sector? Do you think we've hit bottom yet?
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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.