- The Washington Times - Monday, February 27, 2006


The backlog of unsold new homes reached a record last month as sales slipped despite the warmest January in more than 100 years.

The Commerce Department reported yesterday that sales of new single-family homes dropped by 5 percent to a seasonally adjusted annual rate of 1.233 million units last month.

That was the slowest pace since January 2005 and left the number of unsold homes at a record high of 528,000.

Analysts viewed the new data as further evidence that the nation’s red-hot housing market, which hit record sales levels for five straight years, definitely has started to cool.

“The decline in new-home sales in January makes it clear that there is some real softening in the housing market,” said Joel Naroff, chief economist at Naroff Economic Advisors.

The 5 percent decline was bigger than expected, dashing hopes that the milder-than-normal January would help to bolster demand. The warm weather had pushed up the level of construction starts last month by 14.5 percent, the fastest rate in three decades.

But the new report showed that with sales lagging, the increase in building activity left a total of 528,000 new homes still for sale at the end of the month, a nine-year high.

Even with the softening in sales, prices were up in January, with the median price climbing to $238,100, up 4 percent from December, but less than the all-time high of $243,900 set in October.

For the past few years, home prices have been surging at double-digit rates, gains that analysts said likely will slow now that sales are softening and inventories of unsold homes are rising.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, predicted “real downward pressure on prices over the next few months.”

David Seiders, chief economist at the National Association of Home Builders, said surveys showed that the number of builders who are throwing in various amenities for free in order to move homes has risen to 41 percent.

Mr. Seiders predicted that home-price gains, which were running at about 12 percent last year, will slow to about 6 percent this year.

He said a lot of this year’s change will reflect less speculative investor activity and more sales spurred by people desiring to live in the homes.

“Hopefully, that is all that is developing here,” Mr. Seiders said.

The 5 percent January drop in sales came after a revised 3.8 percent increase in December and was the biggest setback since a 7 percent drop in November.

The biggest decline in sales was a 14.9 percent decrease in sales in the Northeast, which came after an even bigger 23 percent plunge in sales in December. Sales in the Midwest were down 10.8 percent after having risen by 21.2 percent in December.

In the South, sales fell by 10.3 percent in January after a 1.2 percent gain in December.

Bucking the national trend, sales in the West posted an 11.3 percent increase in January after a 6.3 percent gain in December.

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