New-Home Sales Fall, 2011 On Track To Be Worst Year On Record

New-home sales fall, 2011 could be worst year yet (AP, Aug 23, 2011):

WASHINGTON (AP) — Sales of new homes fell for the third straight month in July, a sign that housing remains a drag on the economy. If the current pace continues, 2011 would be the worst year for new-home sales on records dating back at least half a century.

Sales fell nearly 1 percent in July to a seasonally adjusted annual rate of 298,000, the Commerce Department said Tuesday. That’s less than half the 700,000 that economists say represent a healthy market.

Last year, 323,000 homes were sold – the worst year on records that go back to 1963.

While new homes represent less than one-fifth of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs and $90,000 in taxes, according to the National Association of Home Builders.

High unemployment, larger required down payments and tougher lending standards are preventing many people from buying homes.

Plunging stocks and a growing fear that the U.S. could tip back into another recession are also keeping people from entering the troubled housing market.

Renewed concerns about job security likely weighed on many would-be buyers’ minds, said Mark Vitner, senior economist at Wells Fargo.

A slowdown in the U.S. economy has more than offset any boost from super-low mortgage rates, said Paul Dales, senior U.S. economist at Capital Economics.

“A new home is a luxury that many Americans can no longer afford,” Dales said.

All home sales remain weak. The sales pace for previously occupied homes is trailing last year’s 4.91 million sales, the fewest since 1997. In a healthy economy, people buy roughly 6 million existing homes annually.

A report last week showed that more home sales than usual fell apart at the last minute, a sign that many buyers may be nervous about the economy. At least 16 percent of deals were canceled head of closings last month – four times the rate in May.

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