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Sales of new homes reach 12-year low in November

December 29, 2007|From the Associated Press

The national housing market plunged deeper into despair last month with sales of new homes plummeting to their lowest level in more than 12 years.

The only bright spot was the West, where sales of new homes were up 4%. But that wasn't nearly enough to compensate for downturns elsewhere.

The slump worsened even more than most analysts expected, heightening fears that the country might be thrust into a recession.

New-home sales tumbled 9% in November to a seasonally adjusted annual sales pace of 647,000, the Commerce Department said Friday. That was the worst sales pace since April 1995.

"It was ugly," said Richard Yamarone, economist at Argus Research. "It is the one sector of the economy that doesn't show any signs of life. It doesn't look like there is any resuscitation in store for housing over the next year."

The housing picture turned out to be more grim than most anticipated. Many economists were predicting sales to decline by 1.8% to a pace of 715,000.

In the Midwest, new-home sales plunged 27.6% in November from October. Sales dropped 19.3% in the Northeast and 6.4% in the South.

Over the last 12 months, new-home sales nationwide have tumbled by 34.4%, the biggest annual slide since early 1991 and stark evidence of the painful collapse in the once-highflying housing market.

"I think you can classify what we are seeing in the housing market as a crash," said Mark Zandi, chief economist at Moody's Economy.com. "The downturn is intensifying."

Would-be home buyers have found it more difficult to secure financing, especially for jumbo mortgages exceeding $417,000.

The tighter credit situation is deepening the housing slump. The inventory of unsold homes has ballooned, which will force builders to cut back even more on construction and look for ways to sweeten the pot to lure prospective buyers.

"A lot of borrowers are being disqualified for loans," said Brian Bethune, an economist at Global Insight. "If you can't qualify for a mortgage, the game is over. For those who do qualify, it takes longer to get loans."

Problems in housing are expected to persist well into 2008 -- a major election year.

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