(Update 1: adds NAHB comments) Sales of new homes dropped again in February, the fourth straight month of decline, reaching a sales pace not seen since February 2005. New home sales fell 1.8 percent in February to a seasonally-adjusted annualized rate of 590,000 units, the Commerce Department reported Wednesday morning. The decline was largely in line with economists' forecasts, reported Bloomberg News. Most had pegged the February rate at 578,000, within a range of 560,000 to 600,000.
New Home Sales, SAAR
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The graph to the right, provided with permission from the Calculated Risk blog, shows the historical trending for new home sales on a seasonally-adjusted annual rate basis. Inventory fell to 471,000, according to the report, representing 9.8 months-of-supply at the current sales pace; months-of-supply remained largely unchanged from last month. While the Commerce Dept. statistics don't account for cancellations, which are at record levels, the February inventory numbers may yet suggest a real fall in new home inventory. Inventory overhang is vital for most economists, who say that until inventories in both the existing and new home markets begin a long and likely painful process of decline, any recovery in U.S. housing markets is a distant wish. "[T]he 471,000 units of inventory is below the levels of the last year, and it appears that even including cancellations, inventory is now falling," wrote the eponymous author of the Calculated Risk blog. "Builders have been pulling out all the stops to sell homes and narrow the supply of units on the market," noted Sandy Dunn, president of the National Association of Home Builders. "Unfortunately, buyer demand remains very weak heading into the spring home buying season." A report earlier this week from the National Association of Realtors found that existing home inventory had fallen during February as well, although most industry experts expect to see the number of existing homes listed for sale increase dramatically in coming months as the traditional spring selling season gathers steam.