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| March New Home Sales Worse Than Expected |
| Written by Jonathan Smoke | |
| 04.24.2008 | |
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Discuss this article on the forums. (0 posts) While economists were expecting a 2% decline, the Commerce Department released the preliminary new home sales for March today and instead we found an 8.5% decline over February. This was also significantly worse than the decline in existing home sales reported earlier in the week. While this level and pace of sales is at 17-year lows, we still haven’t reached the lows of the last housing recession in 1991. But on the other hand, the months’ supply of new homes has shot up to 11 months, which is worse than the ’91 recession and is darn close to the highs of the ’80-’81 recession. Why are the new home sales trends getting worse? First, there are inventory issues in many markets where foreclosures are now adding to the pressure of existing homes as a near substitute for new homes. Second, consumer sentiment is extremely bearish, so while the expectation remains that home prices will fall, would-be buyers are patiently waiting for proof that the bottom has been reached. Third, credit has not yet stabilized or at the very least the pool of buyers with limited down payment resources and/or limited or poor credit have no access to financing that was more abundant as late as this time last year. Unless a positive tipping point occurs in April or early May -- and I see no reason to believe it has happened or will -- the spring selling season can be written off as a disaster. As a result, 2008 will be next to impossible to see dramatic improvements in the situation on a national scale. Locally though, some markets are clearly doing better than others. Kudos to the Wall Street Journal for posting a nifty housing widget that shows key stats for 28 major metro areas. Below is a snapshot of their dashboard. Click on it to see the interactive tool on WSJ.com.  
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