New home sales drooped in January, falling 12.6%, according to Commerce Department data. The decline amounts to a seasonally-adjusted annual rate of 284,000 units and largely offsets a substantial sales gain in California posted in the previous month, due in part to a tax break expiring in California, the Commerce Department said in a report.
“While poor weather conditions likely played a part in keeping potential buyers on the sidelines this January, we do expect consumer demand to improve somewhat along with job-market gains heading into the spring buying season,” said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. “However, with the already-thin inventory of new homes for sale continuing to decline and the consistent unavailability of construction credit, the question is whether builders will be able to meet the improving demand as it emerges.”
NAHB Chief Economist David Crowe aligned January sales activity with the low level of activity in the second half of 2010 and attributed the drop to the large inventory of existing homes and tight credit.
In terms of regional data, the western region saw the biggest decline at 36.5%, while sales in the south fell 12.8%. The northeast gained 54.5% from very low sales in the previous month and sales increased 17.1% in the midwest.
At the current sales pace, the inventory of new homes was around 188,000 units in January, amounting to a 7.9-month supply.
Written by Elizabeth Ecker