WASHINGTON – Sales of new U.S. homes plunged 10.5 percent in February, the biggest drop in nearly nine years, while prices fell and the number of homes on the market hit a record high, the government said on Friday in a report signaling significant slowing in the housing market.
The pace of new single-family home sales slowed to a 1.080 million unit annual rate in February from January's downwardly revised 1.207 million unit rate, the Commerce Department said.
Economists had expected new home sales to decline to a 1.200 million unit rate in February from January's originally reported 1.233 million unit pace.
While sales slowed, supply surged. The number of new homes available for sale climbed to a record 548,000 by the end of the month. At the current sales pace, that represents 6.3 months' supply — the largest inventory of new homes since January 1996, the government report showed.
Median home prices declined for the fourth month in a row, hitting $230,400 in February, the lowest level since July 2005.
The slowdown was driven by weak buying in the U.S. West and South — regions that have posted some of the biggest gains in home prices over the five-year rally in the housing sector. Sales fell 29.4 percent in the West, the sharpest decline in more than 24 years. Sales in the South fell 6.4 percent, the report said.
Sales climbed 12.7 percent in the Northeast and 5.2 percent in the Midwest.
As mortgage rates started to climb last year, the U.S. housing market began to slow, ending a five-year run that shattered sales and construction records and sent prices up more than 55 percent on average across the country. The data have been uneven, showing occasional pauses in the cool-off.
For example, trade group data on Thursday showed a surprising pickup in the pace of home resales in February, but the National Association of Realtors called it "an aberration" due to warm weather that spurred buying.
Economists, however, widely expect the housing market to weaken throughout 2006.
The new home sales data is subject to revision as the statistics are estimated from sample surveys.