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New Home Prices Plummet

Posted by: Chris Steins
Thanks to: Hugh Pavletich
29 October 2006 - 1:00pm

The median price of a new home dropped nearly 10% in September, 2006 -- the largest one-year decline since 1970. Home builders reduce prices to clear inventory.

"Rule of thumb: If you want to know how bad a housing downturn is, look at prices of new homes. Builders need to keep their cash flowing to meet obligations to lenders, so they do whatever it takes to move the merchandise, even when demand is slumping."

"...The reason new-home prices are a better gauge than existing-home prices is that owners of existing homes can pull their homes off the market when conditions are weak. Doing so shrinks the supply and props up the prices of those few homes that do get sold."

From a press release by the US Census Bureau and the US Department of Housing and Urban Development:

"Sales of new one-family houses in September 2006 were at a seasonally adjusted annual rate of 1,075,000,according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing andUrban Development. This is 5.3 percent (±15.6%)* above the revised August rate of 1,021,000, but is 14.2percent (±12.2%) below the September 2005 estimate of 1,253,000."

Full Story: The Housing Fire Sale
Source: Business Week, October 26, 2006
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