The US housing market continued to struggle in February. New home sales declined 16.9% in February, according to statistics [.pdf] released today from the Housing Department and Census Bureau. February not only marks the second consecutive month with a double-digit decline in new home sales, but February also marks the lowest level of sales since record keeping began in 1963.
After a revised annual rate of 301,000 new homes sold in January, the annual rate in February totaled 250,000 (Update: Revised to 270,000 in March). Each of the four major regions in the country suffered large declines in new home sales during February, including a sharp 57% drop in the Northeast. Overall, new home sales in February were 28% lower compared to February 2010. As these monthly and annual declines indicate, the housing market maintained a bleak course in February.
Moreover, the last ten months of new home sales rank among the top ten lowest months on record. The following list shows the ten lowest months of new home sales since 1963:
- February 2011 – 250,000 new homes sold
- August 2010 – 274,000
- October 2010 – 280,000
- May 2010 – 282,000
- July 2010 – 283,000
- November 2010 – 286,000
- January 2011 – 301,000
- June 2010 – 310,000
- September 2010 – 317,000
- December 2010 – 333,000
In addition to the decline in new home sales, existing home sales also declined in February. Existing home sales, which includes condos, townhomes, and single-family homes, declined 9.6% in February, according to the National Association of Realtors. With existing and new home sales both dropping in February, the recovery of the housing market remains in the distance.
These weak results in home sales come at a time when buying conditions are somewhat favorable. Housing prices have fallen five consecutive months and are currently at their lowest level on record in eleven of the twenty major metropolitan cities. The 30-year mortgage rate also remains at a relatively low rate of 4.76%.
However, despite lower prices and mortgage rates, the credit market remains challenged. Mortgage availability often varies in different areas, according to National Realtors Association President Ron Phipps.
In addition to poor mortgage availability, the demand for home ownership is on the decline. The high unemployment rate not only causes fewer prospective buyers, but an aging population also leads to a lower demand for homes. Though, at the same time, the supply of homes on the market is extremely high due to a flood of foreclosed homes. There were almost 3 million repossessed homes in 2010, which is a record high. An increased supply of homes has already impacted the residential construction industry, which recently declined 23% to its second-lowest point on record.
Altogether, the housing market is suffering from a surge in the amount of homes on the market, as well as a plunge in the demand for home ownership. With such a reality, record low new home sales in February are not as surprising. Similar results are expected in March, as the outlook for a recovery in the housing market similarly remains a long-term goal.