USA: New Homes Sales fell by 26%

Posted on March 6th, 2009 by saman

The U.S. real estate market is facing now the most dramatic period of decline in the recent decades, based on the decline of the demand, the multiplication of cases of foreclosures and growth of stocks, according to International Herald Tribune. Sales of new homes fell last year by 26%, the most drastic decline from the beginning of monitoring sales in 1963, according to U.S. Department of Commerce.

Moreover, the National Association of Realtors announced that sales of foreclosures for sale for a single family, representing a significant proportion of the residential market, have recorded the largest annual decline for the past 25 years. Meanwhile, the average price of those homes fell for the first time in at least the last four decades.

Some economists predict that the market could begin to recover in summer, while others are less optimistic. Only in a month time, new housing sales have recorded a decline of 4.7%, to an annual rate of 604,000 units, the lowest monthly figures recorded since February 1995.

Prices also fell dramatically. In December 2007, the average price of new houses reached 219,000 dollars (148,000 Euros), decreasing by 10.9% compared to December 2006.

The report on sales of new homes in December is terrible, according to Dimitri Fleming, an economist in the ING Bank. December 2007 marked the end of an extremely difficult year for real estate builders, as they assisted to a drop in demand, in the conditions in which customers give up contracts or stay in expectation. On the whole year, the average price of new homes rose by only 0.2%, up to 246,000 dollars (167,000 Euros).

Because of the foreclosures and of the difficult credit conditions, obtaining a mortgage has become more difficult even for customers with a solid credit history. Meanwhile, banks have limited their lending activities restricted after the crisis of the U.S. sub-prime mortgage. Now, manufacturers try to attract buyers reducing prices. They have restrained at the same time construction activities for new housing.

This strategy has not yet led to a fall of stocks. Sales of new homes fell in most regions of the country, the most severe decreases being recorded in the regions of south and west. The Northeast witnessed a slight sales increase. The Department of Commerce revised estimates relating to sales of new homes, up to an annual rate of 634,000 units. Initial estimates indicated a rate of 647,000 units.

The foreclosures crisis hits real estate buyers of the rich homes in Manhattan. Manhattan residents, the luxury business neighborhood in New York business where it is established the stock exchange on Wall Street, start to feel more and more powerfully the effects of the foreclosures crisis in the United States.

If some time ago, wealthy officials, and bankers who work here were almost hunting some of the most expensive apartments in New York, with the worsening of the foreclosures crisis in the U.S. they have become a kind of outcasts of the real estate market in Manhattan, according to The International Herald Tribune.