As foreclosed homes continue to fill the U.S. housing market, new-home sales nationwide in October dropped to a record low of 433,000 units since 1991. According to the Department of Commerce, new-home sales fell by 5.3 percent, with the average sales price dropping to $218,000, its lowest level in four years.
Majority of the 68 economists surveyed by Bloomberg predicted that new-home purchases would fall to 441,000 units yearly, calculated from forecasts that ranged from a high of 470,000 to a low of 380,000 due to foreclosure concerns. The Commerce Department modified its earlier September forecast of 464,000 to 457,000 units annually because of the continued entry of foreclosed homes into the market.
Meanwhile, the Commerce Department’s findings showed that consumer confidence declined by more than what was predicted for November, worrying retailers who are expecting to recover previous losses during the holidays. The Reuters/University of Michigan’s consumer confidence index fell from 57.6 to 55.3 percent in October, affirming the intense effect of continued foreclosures on consumer confidence.
Analysts say that new-home sales represent less than ten percent of the nationwide housing market, but they are recognized as a more significant real estate market indicator because figures are compiled from contracts signed. Sales or purchases of previously owned houses are based on closings and contracts signed months or weeks earlier.
The decline in home prices has been hurting the operations of builders across the country. Texas-based D.R. Horton Inc., considered the biggest U.S. homebuilder, had to cut its dividend following its sixth consecutive quarterly loss in September. Its chief executive officer Donald Tomnitz said it is difficult for customers to take the risk of buying homes in a foreclosure-burdened market.
Many Americans are hoping that the housing market would start to recover after President-elect Barack Obama assumes the leadership of the nation and do something about the credit and foreclosure crisis.
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