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New Home Sales Drop Dramatically

Written by Carla Hill on Tuesday, 29 March 2011 7:00 pm

It's symptomatic of the uncertainty many would-be buyers are feeling in today's economy. Sales of newly-built homes declined by a staggering 16.9 percent in February.

That figure, gathered by the U.S. Commerce Department, only grazes the surface of the massive declines felt in certain regions. The Northeast hit a record low, falling 57.1 percent last month. The Midwest was down by 27.5 percent.

And while the number of new housing units remains the same, the National Association of Home Builders reports that "because of the slower sales pace, the months' supply of homes increased to 8.9 from 7.4 in the previous month."

May buyers and investors are waiting out the market bottom. Others are simply holding their breath for job growth. They may be able to breathe easy soon. As of the latest jobs report from the U.S. Bureau of Labor and Statistics in early March, the unemployment rate was 8.9 percent. This is considerably less than the 10 percent rate seen just a few months ago.

"February's sales numbers add to the mounting evidence that the housing recovery is hesitating along with the inconsistent progress of the economic recovery," acknowledged NAHB Chief Economist David Crowe. "Another problem, however, is consumer perceptions of where home values are headed, particularly when national indexes do not reflect local markets." Meanwhile, he said, "The continuing fragile state of the housing market should serve as a flag of caution to policy makers who are considering major changes to the nation's housing finance system and to crucial tax incentives for homeownership such as the mortgage interest deduction."

Additionally, there were 250,000 jobs added in February 2011. This is good news that is moving in the right direction.

Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nevada, repots, "A recent Gallup poll confirmed that the economy is Americans' top concern right now. At the same time, even qualified buyers who are ready to make a purchase are facing frustrating challenges in terms of tight consumer lending conditions and inappropriately low appraisal values on new construction."

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