WASHINGTON -- Sales of new homes plunged in February to the slowest pace on records dating back nearly half a century, a dismal sign for an already-weak housing market.
New-home sales fell 16.9 percent last month to a seasonally adjusted annual rate of 250,000 homes, the Commerce Department said Wednesday. It's the third straight monthly decline and far below the 700,000-a-year pace that economists view as healthy.
The median price of a new home dropped nearly 14 percent to $202,100, the lowest since December 2003. The median is now 30 percent higher than the median price of resold homes -- twice the markup typical in healthy housing markets.
Builders have struggled to compete with a wave of foreclosures that has lowered the price of previously occupied homes. High unemployment, tight credit and uncertainty over prices have also kept many potential buyers from making purchases.
Last year was the fifth straight year of declines for new-home sales after they reached record highs during the housing boom. Economists say it could take years before sales return to a healthy pace.
Poor sales of new homes mean fewer jobs in the construction industry, which normally powers economic recoveries. Each new home creates an average of three jobs for a year and $90,000 in taxes, according to the National Association of Home Builders.
Many builders are waiting for new-home sales to pick up and for the glut of foreclosures to be reduced. But with 3 million foreclosures forecast this year nationwide, a turnaround isn't expected for at least three years.
"We fully expect further price declines in order to help clear inventory from the market although this problem is more acute in the existing home market than the new home market," said Dan Greenhaus, chief economic strategist for Miller Tabak + Co.
Homebuilders have taken notice. Residential construction has all but halted. Builders broke ground last month on the fewest homes in nearly two years. And building permits, a gauge of future construction, sank to their lowest in more than 50 years.
By contrast, sales of previously occupied homes have fallen by a more modest 3 percent in the past year. Prices have dropped more than 5 percent. In February, the median price for a resale was $156,100, according to the National Association of Realtors.
New-home sales fell to record lows last month in almost every region of the country. Sales dropped 57.1 percent in the Northeast, 27.5 percent in the Midwest, 14.7 percent in the West and 6.3 percent in the South. Those are record lows in each region except the West, which recorded its lowest sales pace in October.
Given the pace of new-home sales, it would take nearly 9 months to clear them off the market. Economists say a six-month supply of homes is healthy.