New home sales fall 10.2%, down 48% in past year
By: Dennis Norman
This morning the U.S. Department of Commerce released a report showing the sale of New Homes in January was down 10.2% from December and down over 48% from a year ago.
There is some good news in this report…consistent with the last few months, the number of new homes available for sale continues to drop…in January there were 342,000 new homes for sale down over 4% from Decembers inventory of 357,000 and down 8.5% from Novembers inventory of 374,000 homes.
Unfortunately as a result of the declining number of new homes sold, now down to an annual rate of 309,000 homes, the number of months supply that exists continues to grow. For January the inventory represents a 13.3 month supply compared with Decembers supply of 12.9 months and November at 11.5 months.
Prices on new homes continue to drop as well. The median price for January was $201,100, down 2.6% from Decembers median price of $206,500 and down over 13% from January 2008′s median price of $232,400.
One might think this sounds pretty terrible…to buy a new home in January 2008 only to wake up a year later and find it may have dropped in value by 13%, what kind of investment is that? Good question. Lets compare that investment to the stock market.
The Dow Jones Industrial Average for January 4, 2008 it was at 12,800 and on January 2, 2009 it had dropped almost 30% to 9,034. The S&P 500 in January 2008 was at 1,447 in January 2009 had dropped over 35% to 931. When you look at the alternatives, maybe the 13% decline in new home prices isn’t so bad after all? Not to mention, you at least get to live in the house and enjoy it while the value is declining…beats what you can do with your brokerage statements.
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