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US homes market faces challenging 2011 as sales plunge to new lows

Thursday, March 24th 2011 - 18:27 UTC
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NAR chief economist Lawrence Yun NAR chief economist Lawrence Yun

United States sales of new homes fell 16.9% last month compared with January and by a whopping 28% from the level of February 2010, the U.S. Commerce Department said. The February 2011 figure represents an annualized rate of 250,000 new home sales. Analysts had expected an annualized rate of 290,000.

The median sale price of a new home fell 13.9% last month to 202,100 US dollars, the largest month-to-month decline on record.

Sales of existing homes dropped 9.6% last month to an annualized rate of 4.88 million amid the lowest purchase prices since February 2002, the National Association of Realtors said Monday.

February’s median sale price for an existing home, 156,100 USD, represents a 5.2% drop from 12 months earlier.

The inventory of unsold existing homes rose 3.5% from January to 3.49 million, meaning that 8.6 months would be required to sell those properties if purchases continue at the current pace, NAR said.

NAR’s numbers were much worse than the expectations of most analysts, who forecast a 3.9% fall in sales to an annualized rate of 5.15 million.

Taken together, the reports from NAR and the Commerce Department indicate persistent weakness in the U.S. housing market, whose collapse helped lead to the global financial meltdown of 2008.

“Housing affordability conditions have been at record levels and the economy has been improving” NAR chief economist Lawrence Yun said. “But home sales are being constrained by the twin problems of unnecessarily tight credit, and a measurable level of contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers”. He added this “tug and pull is causing a gradual but uneven recovery”.

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