US new home sales slide in record plunge in '07
Thursday, 31 January 2008

Agence France-Presse . Washington

Sales of newly built homes across the United States plunged by 26.4 per cent during 2007 compared with the prior year, marking the biggest annual fall on record, a government survey showed Monday.

The Commerce Department reported that US new-home sales dropped to an estimated 774,000 properties in 2007, compared with 1.051 million homes in 2006, amid a worsening property slump.

Sales of brand-new homes dropped to their lowest annual level last year since 1996, when 757,000 new homes were sold.

Overall property sales have tumbled across the United States amid mounting economic uncertainty and as major banks have revealed hefty losses tied to ailing mortgage investments.

A surge in foreclosures has also dragged down sales. Some home builders have been discounting properties, or even offering potential buyers enticing inducements such as iPod players, plasma televisions and gym memberships, in a bid to sell unsold homes.

New home prices barely moved last year, rising just 0.2 per cent to 246,500 dollars compared with 2006. Fears are mounting that the housing downturn could derail wider economic growth and pitch the world's largest economy into a recession.

The Federal Reserve has slashed interest rates since September in a bid to underpin economic momentum, most recently in a surprise decision last Tuesday when it cut its key interest rate by an historic three quarters of a percentage point, to 3.50 per cent.

The central bank is due to hold a two-day meeting that ends Wednesday and most economists predict it will unleash another rate cut.

The administration of US President George W. Bush has backed a wide-ranging mortgage relief effort by lenders which could help up to 1.2 million struggling borrowers meet their mortgage payments in a bid to offset the market slump.

The Commerce Department's monthly snapshot also showed that new-home sales fell 4.7 per cent in December to 604,000 properties, marking the lowest level of monthly sales in almost 13 years. 'December's numbers were disappointing in every way.

Sales and prices were down, inventories were up,' said Patrick Newport, an economist at Global Insight. Most economists had only expected December sales to dip to around 645,000 homes.

On a monthly basis, new-home sales plummeted by over 40 per cent compared with December 2006, underlining the depth of the property slowdown affecting the world's largest economy.

The median price —the mid-point between the highest and lowest price — of a new home fell 10.8 per cent to 219,200 dollars in December compared with the prior month. Prices have declined 10.4 per cent compared with a year earlier. December's slower sales lifted the inventory of unsold properties to a 9.6-month supply, or almost a half million properties.

Analysts said some builders may have to discount prices even more to sell brand-new properties. Sales of new homes also have been dented by the slowdown plaguing the bigger market for existing homes, which is also weighed down by a supply glut.

The government report showed new-home sales declined in most regions of the country last month, except for the Northeast, where sales rose slightly.

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