Terry’s note: This article speaks to the “macro view” of the housing market. However, the micro market in the Vail Valley does share some characteristics of this trend. The Vail Valley has very few new homes being built for the reason that you can buy a used home cheaper than you can build due to the number of foreclosures and short sales. Also, many owners are underwater on their mortgages and can’t move. Until this changes, the local construction industry will remain depressed.
By Steve Goldstein, MarketWatch
WASHINGTON (MarketWatch) — Sales of new single-family homes collapsed in February, the Commerce Department reported Wednesday, as a combination of high unemployment, tumbling prices and a glut of cheaper alternatives brought activity to a near-standstill.
New-home sales fell 16.9% to a seasonally adjusted annual rate of 250,000 in February, though January’s figures were revised higher to 301,000 from 284,000. Compared to February 2010, sales collapsed by 28%.
Every region but the West saw record lows, and in the Northeast, sales dropped by 50% compared to year-earlier levels.
Economists polled by MarketWatch had expected a slight rise to a 290,000 rate in February. January’s sales were hurt in part by abnormally bad weather and the expiration of a California tax credit.
The new-home sales release is notoriously volatile, and the margin of error is plus or minus 19.1%. The less-volatile three-month average to February was 295,000, compared to 307,000 in January.
Demand for new homes is weak, constrained by still-high unemployment, a slow-growing economy, but most of all the remnants of the house-price bubble, with many owners unable to move due to being underwater on their mortgage.
Furthermore, it’s now far cheaper to buy an existing home due to the glut of foreclosed properties on the market.
The median price of a new home in February was $202,100, a dive of 13.9%, which is the largest one-month percentage drop on record. Even so, the median existing-home price was $156,100 in February.
In Dec. 2007, the first month of the Great Recession, the gap between the price of new and existing homes was far narrower, when a new home fetched $227,700 and a lived-in home cost $207,100.
At the current sales rate, there are supply of 8.9 months, the highest backlog since the 9.1 months in August 2010.
Steve Goldstein is MarketWatch’s Washington bureau chief.