New Home Sales Unexpectedly Fall To Record Low In January

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New home sales unexpectedly showed a substantial decrease in the month of January, according to a report released by the Commerce Department on Wednesday, with sales falling for the third consecutive month to reach a record low.

The report showed that new home sales fell 11.2 percent to an annual rate of 309,000 in January from the revised December rate of 348,000. Economists had expected sales to rise to 354,000 from the 342,000 originally reported for the previous month.

With the unexpected decrease, new home sales fell to their lowest level on records going all the way back to 1963.

Teunis Brosens, Senior Economist at ING, said, "Apparently, awareness of the extended and broadened homebuyer tax credit (that requires deals to be signed by 30 April and closed by 30 June) had not yet reached potential buyers in January."

"Demand could still receive a boost from the tax credit in the coming months," Brosens added. "But the disappointing sales figure shows that the housing recovery remains very brittle."

The unexpected drop in new home sales was due in large part to a steep drop in sales in the Northeast, which fell by 35.1 percent in January.

New home sales in the West and South also fell by 11.9 percent and 9.5 percent, respectively, while new home sales in the Midwest rose by 2.1 percent.

The report also showed that the estimate of new houses for sale at the end of January was 234,000, up modestly from 233,000 in December.

Due to the slower rate of sales, however, the months of supply of new homes for sale jumped to 9.1 in January from 8.0 in December. With the increase, the months of supply rose to its highest level since May of 2009.

Additionally, the Commerce Department said that the median sales price of new houses sold fell 5.6 percent to $203,5000 in January from $215,600 in December. The median sales price was down by a more modest 2.4 percent compared to the same month a year ago.

Housing data is likely to remain in focus on Friday, with the National Association of Realtors due to release its report on existing home sales in the month of January. Economists expect sales to edge up to 5.50 million from 5.45 million in December.

New home sales unexpectedly showed a substantial decrease in the month of January, according to a report released by the Commerce Department on Wednesday, with sales falling for the third consecutive month to reach a record low. The report showed that new home sales fell 11.2 percent to an annual rate of 309,000 in January from the revised December rate of 348,000. Economists had expected sales to rise to 354,000 from the 342,000 originally reported for the previous month. (Market News Provided by RTTNews)