New Home Sales Drop Sharply Again

Date: Jan. 27th, 2010
Contact: BBC

Sales of new homes in the US fell sharply for the second month in a row in December, raising further doubts about recovery in the housing market.

The Commerce Department said sales fell by 7.6% to a seasonally-adjusted annual rate of 342,000 homes, down from a revised rate of 370,000 in November.

Analysts had expected new home sales to increase in December.

A total of 374,000 new homes were sold in 2009, 23% fewer than in 2008 and the lowest number sold in a year on record.

The fall in sales in the last two months of the year reflects the extension of first-time buyer tax credits, which had been due to expire in November.

In the run up to November, sales were boosted by buyers looking to take advantage of the tax credit, but now that it has been extended to the end of April, the incentive to buy has disappeared, analysts say.

However, as the new deadline approaches, new home sales could pick up again, analysts said.

"This [fall] was again related to the potential ending of the home-buyer tax credit. If you don't start seeing a rebound by February in these home sales then I would start to get concerned," said John Canally at LPL Financial.

The median sales price for December was $221,300 (£136,700).