US housing market on a long, slippery slide

01 October 2007

August was the worst month for sales of new homes in the United States over the last seven years; figures released on Thursday 27 September by the government have shown. During the past year, sales of new homes have dropped a staggering 21 per cent, forcing builders to announce huge discounts and incentives to sell the houses they''ve completed.

For August, the government has said, the median price of a new home sold was $225,700 — 7.5 per cent lower than the same period last year — the biggest drop in 37 years. The National Association of Realtors has said it is the first national decline in the median house price since the Great Depression.

The downward move more than erased July''s brief upward bump in new home sales; it has to do with the credit issues that rocked the stock market last month.

Existing sales were down an astounding 4.9 per cent last month. That''s the worst monthly performance since March. The official sales pace for the month was a seasonally adjusted annual rate of 795,000 units; well below the 867,000 economists were betting on and the slowest since June 2000.

Poor prognosis?
Overall, it presents a gloomy picture of the overall market this year. It means that the problems in the mortgage finance arena are taking a further toll on buyer demand, and weighing heavily on builder confidence measures. The US housing market has been in a steep decline, hounded by falling prices and sluggish demand.

Housing major KB Home reported a wider-than-expected quarterly loss on Thursday 27 September. It said write-downs for land values and 28 per cent fewer homes sold were responsible, as an increasing supply of new and existing homes and tighter mortgages kept buyers sidelined.