February new home sales dropped 16.9% to a new record low of 250,000 (on a seasonally-adjusted annual basis). The February level was almost 9% below the previous low set in August 2010 since the series began in 1963. All four census regions fell and to new record lows in all regions except the West. The inventory of unsold new homes remained at 186,000, a 44 year low.
The decline in housing demand, reaffirmed in existing home sales, is the result of consumer uncertainty and confusing government policy. Consumers have been hit with new uncertainties in energy prices, economic growth potential, job creation and house prices. Government policy makers continue to make noise about removing the housing incentives that have been in place for decades such as support of the mortgage market, tax incentives and a positive attitude toward home ownership.
In addition, mortgages are difficult to obtain even with the federal support. Credit thresholds continue to tighten and even home buyers with solid credit and significant down payments are having difficulty getting a mortgage. Builders also have little inventory; the number of completed homes for sale dropped again to 76,000 for the entire country. The low inventory means builders have few options to show home buyers who need a home immediately, which is often the case for current home owners who wait for a confirmed sale of the current home before shopping.
New home prices fell 8.9% from one year earlier because the share of homes sold increased in the first time home price range of $150,000 to $200,000.