New home sales in 2008 hit record low

By now it shouldn't come as any surprise that new home sales in 2008 fell to a record low of 331,000 annualized sales by December. Yet because the sales are so low, it would still take nearly 13 months to burn off the existing inventory (although some economists would argue that the time line for market equilibrium of new versus existing homes aren't the same because it takes much longer for home builders to create the product to sell). From a Washington Post story:

Builders cut production and prices but are competing against a backlog of foreclosed properties that are selling at significant discounts, economists said. Until more buyers venture back into the market, prices will continue to fall and sales will remain slow, they said.

In December, new-home sales tumbled 15 percent compared with November, to an annualized rate of 331,000 sales, and were down 44.8 percent compared with December 2007, according to the Commerce Department. For all of 2008, builders unloaded 482,000 new single-family houses, down 37.8 percent from 2007. That is the biggest year-over-year sales decline on records that go back to 1963...

Meanwhile, prices have tumbled to 2004 levels. The nationwide median sales price fell 9.3 percent, to $206,500, in December from $227,700 a year earlier, the biggest drop since 1970. For the year, prices fell about 7 percent, to $230,600, from $247,900 in 2007.

Despite industry efforts to cut supply and prices, there are still far more homes than buyers. It would take 12.9 months to sell all the homes on the market at the current rate, according to the Commerce Department. That is the worst sales rate on record...

The current number of homes for sale might have been acceptable two or three years ago, but the sales rate was much faster then, economists said. While new homes await buyers, existing homes in pockets of the country are being snapped up by bargain hunters, according to industry data released earlier this week. But that market is being fueled by foreclosed homes and distressed sellers that have dragged down prices...