New-home sales in the United States fell in October to the lowest level in 17 years as the credit crunch deprived potential buyers of financing.
Purchases dropped 5.3%, to an annual pace of 433,000, lower than forecast and the fewest since January 1991, the Commerce Department said last week. The median sale price declined to a four-year low.
"The new-home market remains extremely weak," said Steven Wood, the president of Insight Economics in Danville, Calif. "A substantial inventory overhang still exists. This is pressuring home prices lower."
Economists had forecast that new-home sales would drop to a 441,000 annual pace, according to the median estimate in a Bloomberg survey of 68 people. Their forecasts ranged from 380,000 to 470,000. The government revised the September sales pace down to 457,000, from an initial estimate of a 464,000 rate.
The median price of a new home fell 7% from the year earlier, to $218,000, its lowest since September 2004. Sales of new homes were down 40% from the year before.
The housing report showed smaller inventories. The number of homes for sale fell to a seasonally adjusted 381,000, the fewest since February 2004.
Still, the supply of homes at the current sales rate rose to 11.1 months' worth, from 10.9 months. The National Association of Realtors has said a five to six months' supply is usually consistent with a stable market.
New-home purchases, which account for less than 10% of the housing market, are considered a timelier indicator because they are based on contract signings. Sales of previously owned homes, which make up the remainder, are compiled from closings and reflect contracts signed weeks or months earlier.
Resales fell more than forecast in October, and prices dropped by the most on record, data from the Realtors group showed last week. The S&P/Case-Shiller index of house prices in 20 U.S. cities also fell in the 12 months through September at the fastest pace on record, according to a report released last week.
Builders are hurting as buyers remain tentative.
D.R. Horton Inc., the largest U.S. home builder, last week reported its sixth straight quarterly loss and cut its dividend.
"People have cold feet," Donald Tomnitz, the Forth Worth builder's chief executive officer, said on a conference call last week. "As housing prices continue to decline in a number of markets, it's difficult to make a buying decision unless you absolutely have to."