January new home sales fall 2.8% to 588k annual rate, below estimate

27 02 2008

January new home sales fall 2.8% to 588k annual rate, below estimate

Posted by: in Housing

Filed under: Bad news, Economic data, Housing, Recession

Sales of new homes fell 2.8% to a seasonally-adjusted annual rate of 588,000 in January 2008, the U.S. Commerce Department announced Wednesday (pdf). Economists surveyed by Bloomberg had expected a seasonally adjusted rate of 600,000.

Meanwhile, the December 2007 seasonally-adjusted total was revised to 605,000.

The median sales price of new houses sold in January 2008 fell 4.3% to $216,000; the average sales price rose 0.7% to $276,600.

In addition, the seasonally-adjusted estimate of new houses for sale at the end of January 2008 was 482,000 — representing a 9.9-month supply at current the current sales rate.

Economist Steve Affinito told BloggingStocks Wednesday the January 2008 new home sales data is in-line with earlier data on existing home sales, indicating that the housing slump is far from over.

“The important numbers in today’s report are the median home price and inventories. The median home price fell over 4% to $216,000 and that indicates considerable market softness, and inventories remain at housing recession levels, nearly 10 months,” Affinito said. “Keep in mind that these stats are occurring while near-record-low mortgage rates are working their way into the system. So it advocates home buyers are reluctant to commit, which is understandable, given the likelihood of future housing price declines.”

Housing lowers U.S. GDP

Further, Affinito stated the housing sector’s slump is likely to continue to subtract from U.S. GDP through at least Q3 2008, and possible well in Q4 2008. Affinito added that he now anticipates the slumping housing sector to lower 2008 U.S. GDP by about 1.0-1.2 percentage points.

“The U.S. economy is diverse and technology-intensive, but housing still plays a significant role because it feeds so many lateral sectors, like appliances, furniture, and home improvement/landscaping,” Affinito stated. “The economy really benefited from housing during the housing boom, and now we’re seeing the reverse effect during the correction.”

As a result, Affinito believes U.S. Q1 growth will register -0.2% to -0.5%, with a similar reading in Q2, adding that an increase in the home foreclosure rate in the second half of 2008 would deepen and prolong the recession.