New Home Sales, Median Prices Fall in Feb.

Chart shows new-home sales for the past 13 months, seasonally adjusted. (AP Graphic)

This is also from Yahoo News:

WASHINGTON - New home sales fell by the biggest amount in almost nine years in February while home prices declined for a fourth straight month, raising concerns that the once high-flying housing market could be in for a rougher-than-expected landing.

The Commerce Department reported Friday that sales of new single-family homes dropped by 10.5 percent last month to a seasonally adjusted annual sales pace of 1.08 million homes.

It was the second straight monthly decline, following a 5.3 percent fall in January, and marked the biggest one-month drop since April 1997.

The slowdown in sales further depressed home prices with the median price for new homes sold in February falling to $230,400, 1.6 percent below the January level. It marked the fourth straight month that the median, or midpoint for home prices, had fallen since hitting an all-time high of $243,900 in October.

Analysts, who had been forecasting a much more moderate drop of around 2 percent in February sales, said the big decline and downward revisions to sales activity in the previous three months could be signaling that housing will slow more this year than had been expected.

Looks like the housing market is starting to tumble. There is a number of variables that could explain this drop in the housing market. The Feds have been raising interest rates in its quest to fight inflation. Mortgage companies have been pushing the sales of adjustable-rate mortgages on home buyers, rather than fixed mortgage rates. If interest rates continue to rise, these adjustable-rate mortgages will force homeowners to pay higher interest costs. Mortgage companies have also been pushing sub-prime home loans to individuals with dubious credit histories--what's going to happen when these folks miss a payment or two, especially if they're stuck with adjustable-rate mortgages? Credit card debt is up. And we can't forget the speculators in the market, buying and flipping homes for profit. What is going to happen when the speculators can't flip their properties fast enough? All of these variables are placing pressure on the housing market.

We may be starting to see the effects of these variables on the market.
Some final statistics:

Sales of new homes have fallen in four of the past five months with the sales rate of 1.08 million units in February the slowest pace since May 2003.

The slowdown in sales pushed the inventory of unsold homes up to a record of 548,000 homes at the end of February. At the February sales pace, it would take 6.3 months to sell all of the homes on the market, up from 5.3 months in January.

Analysts believe that the growing backlog of unsold homes will add to downward pressure on prices in the months ahead.

By sector of the country, sales were down by the largest amount last month in the West, a drop of 29.4 percent in February. Sales fell 6.4 percent in the South but they rose 12.7 percent in the Northeast and 5.2 percent in the Midwest.