Sales of New Homes Dropped as Foreclosures Increased
Total sales of new homes reached 482,000 in 2008 representing a drop of 37.9 percent from 776,000 units sold in 2007.
The trend in the new homes market is in sharp contrast with existing home sales which increased in December, according to the National Association of Realtors. The increase in sales of existing home is partly attributed to the rise in the number of foreclosed homes and the decline in home prices.
Foreclosure has played a major role on the decline in home prices which attracted homebuyers. Economists expect that new home sales will decline further if no immediate help will be given to homeowners to avoid foreclosures.
Naroff Economic Advisors President Joel Naroff said that existing home prices have reached a low point because of the foreclosure crisis, adding that it would be impossible for builders to compete.
The median sale price of new houses, a measurement of the price at which 50 percent of the homes were sold more and the other 50 percent for less, was $206,500, representing a decline of 9.3 percent from 2007.
Meanwhile, the report about the decline in new home sales and the increase in foreclosure properties did not bode well on the stock market. The Dow Industrials declined by over 180 points.
On the other hand, the inventory of homes that were unsold declined in 2008 but sales remain slow. In Northeast, sales dropped by 28.2 percent to 28,000 units while sales in the West fell by 20.2 to 71,000. In the South, sales declined by 12.1 percent to 181,000 units and 5.6 percent in the Middle West to 51,000.
As long as foreclosures remain unabated and existing home prices continue to decline, builders see no hope for the new homes market. In line with this, builders have called on legislators to help the market by increasing the $7,500 tax credit for homebuyers.
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