New Home Sales Fall 3.6 Percent

WASHINGTON (AP) -- Sales of new U.S. homes dropped unexpectedly last month as the effects of a soon-to-expire tax credit for first-time owners started to wane.

The Commerce Department said Wednesday that sales fell 3.6 percent to a seasonally adjusted annual rate of 402,000 from a downwardly revised 417,000 in August. Economists surveyed by Thomson Reuters had expected a pace of 440,000.

It was the first decline since March. Sales in September were down 7.8 percent from a year ago.

The median sales price of $204,800 was off 9.1 percent from $225,200 a year earlier, but up 2.5 percent from August's level of $199,900.

The drop in sales was driven by a nearly 11 percent decline in the West and a 10 percent drop in the South. Sales rose 35 percent in the Midwest and were unchanged in the Northeast.

The data reflect contracts to buy homes, not completed sales. Many new homes are sold while they are still under construction, and buyers may be worried that they won't be able to complete the deal before the Nov. 30 deadline to take advantage of a tax credit of up to $8,000 for first-time buyers.

Congress is considering extending the tax credit through March 31 and gradually phasing it out over the rest of next year.

"If they don't extend it, then I think the pullback could be quite significant," said Brad Hunter, chief economist with Metrostudy, a real estate research firm.

Even builders of more upscale homes have felt the impact of the looming deadline. That's because those move-up buyers will have trouble selling their homes without the incentive of the credit.

"The fact that the first-time homebuyer tax credit runs out is hurting," said Bob Mitchell, chief executive of Rockville, Maryland-based builder Mitchell & Best, who has gone from selling 80 to 100 homes annually to around 30 this year. Still, he noted, "we're at least selling something."

There were 251,000 new homes for sale at the end of September, down 3.8 percent from August and the lowest inventory in nearly 17 years. At the current sales pace, that represents 7.5 months of supply.

Comments

[Sundialsvc4]

Houses that are in-process will of course be completed.

But, mark my words: you have not even BEGUN to see the Great Depression of 2008 in its full and awful power.

Remember, after the initial "crash" eighty years (plus one day) ago, it was not until 1931 and 1932 that the grip of the depression could no longer be denied.

And we are still in denial. Legislators are content because they are the recipients of millions of these phantom dollars every single day. They are pleased to fiddle while Rome burns. They do not comprehend any more than their counterparts did, eighty years ago yesterday.

[BobsNotWorking]

Just wait to see what happens to the existing home sales when they end the $8k tax credit. There is no recovery underway. It is all just happy talk founded on bailout cash washing over Wall Street.

[nextuser]

same old same old. stock market surging. more job loss. no heath care reform. no extension of unemployment benefits. more same cr4p.

good articles; http://financeopinionss.blogspot.com

no point in voting

[KaptainKen]

Why is this a "surprise?"

At a time when there are so many existing (used) houses on the market ... many bank-owned and a bargain on a "dollar-pe­r-square-f­oot" basis, why is it a surprise that new home construction and sales are falling?

[liberalbug]

It's only a surprise to the insulated bankers and lobbyists and regulators and Congress and people at the fed who keep telling us again and again that the recession is over and that we should all promptly head to the mall to go shopping for cheap Chinese imports for the holidays. They keep forgetting that a big chunk of "us" don't have jobs and those of us that do are hanging on for dear life.

[olephart]

Surprise, people without jobs aren’t buying houses. Surprise, people whose wages have fallen 5 to 10 percent aren’t spending money. Surprise, a Government that cuts taxes for the rich, increases spending on wars and creates huge deficits in the good times goes twice as far in the hole in bad times. Surprise, temporary spending to mitigate current economic woes only pushes back the day of reckoning rather than solving the problem. Surprise, the so called recovery is the calm before the next economic storm and there are no more rabbits in the hat. Surprise, neither Political Party has a viable game plan to solve any of our economic problems.

[bannorhill]

If this was such a surprise to experts AGAIN then maybe we need new experts.

[Viper]

The good news is the lowest suppply of new houses in 17 years....

And the inventory of used homes is dropping.

But until we make the stuff we are importing again... the job situation will not imprive... Wewill stop losing jobs... just not rehiring in a big way even next year.

The only hope is that us Seniors are able to retire and free up jobs for the young,


Regards

[marijam]

Unexpected? Really? Come on, who are these people trying to kid, themselves? They sure aren't going to convince me. I've got two houses now that I can't get rid of.

[Viper]

I have 3 water front condos is Florida... a watefront golf course/yacht club in texas on the Gulf and 14 acres commerical on mainstreet. 2 homes and have not been abe to sell anythng in 4 years.



Regards

[lightningbolt]

This was not unexpected. Many economists have warned that the worst part of the economic crisis is about to begin. Increased unemployment keeps home sales down because fewer people can afford to buy homes.

[bramapanzer]

Oh yeah, don't forget the next big bundle of option arms expiring in '10, the increase in person payments on revolving debt from around -1% of income to 7% of income, therefore dropping consumption by a similar number.

[4TJefferson]

Just Jobs Baby Jobs! Tell the good for nothing bankers to take their bonuses (in the billions) and start hiring people. Every $3 billion in bonus equals about 100,000 jobs.

[Democratuser]

as stated by http://financeopinionss.blogspot.com it is time to create economic growth that we can all benefit from; not the top 1% of earners.

An equitable economy is a better one.

[Lorianne]

It's always "unexpected".
How many financial stories in the last year couched bad news as "unexpected".

Who, exactly, is not expecting these things?

[bramapanzer]

um, who EXPECTED these numbers to rise? Housing prices haven't bottomed, these are M over M numbers, not Y over Y, so seasonal adjustment hasn't happened yet. Housing market always goes down in the winter, who wants to move in December anyways? My question is what kind of "expert" expected the numbers to bounce in the fall and after First time home buyer's credit is over? See "pulled forward demand" and for recent examples, look at car sales after Cash for Clunkers expired. This is BASIC macroeconomics, BASIC - I learned this junk in high school.

[MadAppraiser]

OUR BUTTS ARE IN THE WIND!!! “Close to Home,” the Frontline special succinctly defined the economic condition and destruction of mainstream American employment infrastructure. Money management in place of American manufacturing achieved the wealth redistribution objective. ARE YOU UNEMPLOYED, UNEMPLOYMENT BENEFITS ENDING, OR INSECURE ABOUT YOUR EMPLOYMENT FUTURE??? Does a tax portal to more compounding debt make you feel more economically secure as you dream of past employment security in America? I hope we find something resembling economic security, SOON! Make sure you get enough typing paper, and ink jet cartridges as we dream of employment stability!

[iblogleft]

Only unexpected if you choose not to live in the real world.

[FogBelter]

Why is anyone surprised?

[x004Ronin]

Duh.
If the government stops bribing people to buy stuff, they'll stop buying stuff.
Sales of cars plummetted after cash-for-clunkers.
Sales of homes have now plummeted after the new homebuyer's tax credit is being phased out.

Enough gimmicks. Our economy isn't going to recover until we get job growth. What next, offer a tax credit for people to buy toothpaste?

[iblogleft]

I think the program still has a month to go...

[bramapanzer]

Yes but the program states that you must CLOSE on the house BEFORE Nov 1st, not just start a sale. So what this should be telling you is that people applying for FThomebuyers credit will decrease dramatically BEFORE the program itself ends, thus causing pending "sales" to decrease in October.