David Paul Morris
USA Today
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WASHINGTON (AP) — Sales of new homes plunged a record 24.6% in 2007 while prices posted the weakest showing in 16 years, demonstrating the troubles builders are facing with a huge backlog of unsold homes.
The Commerce Department reported that sales of new homes dropped to 774,000. That marked the worst sales year on record, surpassing the old mark of a 23.1% plunge in 1980. It was also the first time since 2002 that sales were under 1 million.
The government reported that the median price of a new home barely budged last year, edging up a slight 0.2% to $246,900, the poorest showing since prices fell 2.4% during the 1991 housing downturn.
The report reinforced the view that housing is currently undergoing its worst downturn in more than two decades, with the slump threatening to surpass in some ways the severe housing recession of the early 1980s.
The housing weakness has dragged down overall growth and sent shockwaves through the rest of the economy including the financial sector, which is dealing with billions of dollars in losses in subprime mortgages. Some analysts are worried that the fallout could become so severe it will drag the entire country into a recession.
The Federal Reserve unexpectedly cut a key interest rate by the largest amount in more than two decades last week following an emergency meeting, and it is expected the Fed will cut rates further at a regular rate-setting meeting this week.
The 26.4% drop in sales for 2007 represented weakness in every part of the country except the Northeast, where sales posted a small 1.6% advance. Sales recorded declines of 32.2% in the West, 26.7% in the Midwest and 26.3% in the South.
New-home sales fell 4.7% in December to its lowest rate in nearly 13 years while the median sales price dropped sharply.
New-home sales fell to an seasonally adjusted annual rate of 604,000 from a downwardly revised rate of 634,000 in November.
In December, the median sales price for a new home fell 10.9% to $219,200 from November.
