New Homes Sales Down 5 Percent In January

Sales of new single-family homes fell 5 percent to a seasonally adjusted annual rate of 1.233 million units in January following upward revisions to the November and December rates, the U.S. Commerce Department reported. The January sales rate was 3.3 percent above a year ago.

"After a record-setting sales pace in 2005, home builders are seeing an orderly cooling-down process as the supply-demand balance shifts and buyers gain more leverage," said David Pressly, president of the National Association of Home Builders (NAHB) and a home builder from Statesville, N.C. "While many builders are now offering more sales incentives to adjust to this changing environment, housing demand continues to remains quite healthy by historical standards."

The inventory of new homes for sale rose slightly in January to a record 528,000 units from 515,000 units. The months’ supply at the current sales pace rose to 5.2, the highest since late 1996.

"With sales volume off, the inventory level has edged higher, but this rise is nothing to be alarmed about because the fastest growing component of the inventory run-up relates to homes that have been permitted but not yet been started, which jumped 60 percent from this time last year," said NAHB Chief Economist David Seiders.

While the weather across the nation was very mild in January, Seiders noted that this was essentially a non-factor in the new home sales report. "There is little statistical relationship between home sales and weather, unlike the strong relationship between weather and housing starts. Therefore, any inference that sales numbers were actually weaker than they appeared because the weather was so good just does not hold water," he added.

Sales fell across three regions in January, down 14.9 percent in the Northeast, 10.8 percent in the Midwest and 10.3 percent in the South. In the West, sales were up 11.3 percent.

"NAHB’s forecast continues to anticipate a decline of roughly 7 percent in new-home sales for 2006 as a whole, essentially returning to the healthy 2004 level," said Seiders.