New home sales plunge by record amount in 2007

This is from MSNBC News:

WASHINGTON - Sales of new homes plunged by a record amount in 2007 while prices posted the weakest showing in 16 years, demonstrating the troubles builders are facing with a huge backlog of unsold homes.

The Commerce Department reported Monday that sales of new homes dropped by 26.4 percent last year to 774,000. That marked the worst sales year on record, surpassing the old mark of a 23.1 percent plunge in 1980.

The government reported that the median price of a new home barely budged last year, edging up a slight 0.2 percent to $246,900, the poorest showing since prices fell by 2.4 percent during the 1991 housing downturn.

The new report reinforced the view that housing is currently undergoing its worst downturn in more than two decades, with the slump threatening to surpass in some ways the severe housing recession of the early 1980s.

The housing weakness has dragged down overall growth and sent shockwaves through the rest of the economy including the financial sector, which is dealing with billions of dollars in losses in subprime mortgages. Some analysts are worried that the fallout could become so severe it will drag the entire country into a recession.

Nobody has new money to purchase new homes. Those consumers who have purchased homes during the housing bubble are now facing problems with their mortgage payments increasing due to adjustable rate mortgages, and even the declining values of their homes due to falling prices. New housing construction has dropped by almost 25 percent. New home sales have been sliding in November while existing home sales have dropped in December. Home foreclosures have jumped 30 percent in the 3rd quarter of 2007, hitting this nation's real estate market hard. And let us not forget the problems big Wall Street financial firms are having writing down all this subprime debt they have accumulated. This is a huge, long-term problem that the Bush administration has not a clue on resolving, nor do I think that the current crop of presidential candidates can offer solutions. If there is anything that is going to drag this country down into a steep recession, it will be this housing market.

It is just starting.