New-home sales plummet in Nov.

Slump worst in 12 years, raising fears of recession

By Jeannine Aversa , Associated Press

Saturday, December 29, 2007

The housing market plunged deeper into despair last month, with sales of new homes plummeting to their lowest level in more than 12 years.

The slump worsened even more than most analysts expected, heightening fears that the country might be thrust into a recession.

New-home sales tumbled 9 percent in November from October to a seasonally adjusted annual sales pace of 647,000, the Commerce Department reported Friday. That was the worst sales pace since April 1995.

"It was ugly," declared Richard Yamarone, economist at Argus Research. "It is the one sector of the economy that doesn't show any signs of life. It doesn't look like there is any resuscitation in store for housing over the next year," he said.

The housing picture turned out to be more grim than most anticipated. Many economists were predicting sales to decline by 1.8 percent to a pace of 715,000.

By region, sales fell in all parts of the country, except for the West.

In the Midwest, new-home sales plunged 27.6 percent in November from October. Sales dropped 19.3 percent in the Northeast and 6.4 percent in the South. In the West, however, sales rose 4 percent.

Over the past 12 months, new-home sales nationwide have tumbled by 34.4 percent, the biggest annual slide since early 1991 and stark evidence of the painful collapse in the once high-flying housing market.

"I think you can classify what we are seeing in the housing market as a crash," said Mark Zandi, chief economist at Moody's Economy.com. "Sales and home prices are in a free fall. The downturn is intensifying."

The median sales price of a new home dipped to $239,100 in November.

That is 0.4 percent lower than a year ago. The median price is where half sell for more and half for less.

Would-be home buyers have found it more difficult to secure financing, especially for "jumbo" mortgages - those exceeding $417,000.

The tighter credit situation is deepening the housing slump. Unsold homes have piled up, which will force builders to cut back even more on construction and look for ways to sweeten the pot to lure prospective buyers.

"A lot of borrowers are being disqualified for loans. If you can't qualify for a mortgage the game is over. For those who do qualify, it takes longer to get loans," said Brian Bethune, economist at Global Insight.

The housing market has been suffering through a severe slump following five years of record-breaking activity from 2001 through 2005. Sales turned weak as did home prices.

Denver-area market down 29% in ?07

The Commerce Department report does not break down new-home sales by metro area.

But the Denver area has been similarly hard hit, according to a recent report by the Genesis Group, with new-home sales dropping 29 percent to 8,217 in the first nine months of the year.

The figure at the end of the year is expected to be even worse.

Many say home builders are facing their biggest challenge since the 1980s energy bust in large part because of the subprime loan fiasco.

Rocky Mountain News