New Home Sales See Biggest Year Over Year Drop In 37 Years

The U.S. Census Bureau and the U.S. Department of Housing and Urban Development issued their monthly joint report on August new house sales on Thursday.

Like statistics on the sales of existing homes issued earlier in the week by the National Association of Realtors (NAR), sales were off significantly both from one month earlier and from August 2006.

Sales of new one-family homes in August were estimated at a seasonally adjusted annual rate of 795,000 units, 8.3 percent lower than the July rate of 867,000 and the slowest sales pace in seven years. Earlier analysts had projected sales of 830,000 for the month.

The July sales rate was itself revised downward from an original estimate of 870,000 units. The stunning figure, however, was the comparison of August 2007 data with that on sales one year earlier. The most recent figures were down 21.2 percent from estimates of 1,009,000 sales one year ago. According to Reuters News Agency, this is the biggest drop in year-over-year figures in nearly 37 years, and, it is important to realize that the total chaos in the secondary market occurred part way through the reporting period so it is fair to expect further shake-out when September numbers are released.

Two regions showed significant improvement in sales since the previous month. Sales in the Northeast and the Midwest were up 42.3 percent and 20.5 percent respectively. All four regions, however, showed double-digit decreases in sales from the previous August.

The backlog of new homes for sale continues to mount. At the end of August there were 529,000 homes for sale. This is actually 8,000 fewer homes than were on the market at the end of July, but because of declining sales volume the current inventory is expected to take 8.2 months to be absorbed while the July backlog was estimated at a 7.6 months supply. One year earlier there were 568,000 homes for sale which represented a 6.8 months supply. Finished homes have been available for a median period of 5.9 months since completion compared to 3.5 months one year ago.

The median sales price of new homes sold in August was $225,700 and the average was $292,000. One year ago the figures were $243,900 and $317,300 respectively.

Also on Thursday KB Homes, the nation's fifth largest homebuilder joined a parade of its larger competitors such as D.R. Horton and Lennar Corporation in announcing substantial quarterly losses. KB reported a loss of $35.6 million or 46 cents per share for the company's third quarter which ended August 31 compared to a profit one year ago of $153.2 million or $1.90 per share. The losses came despite a $443 million gain from KB's sale of a 49 percent stake in its French subsidiary Kaufman & Broad, SA. Much of the loss came from writing down the value of land.