Foreclosure Glut Slows Rate of August Home Sales

Sales of newly built, single-family homes declined 2.3 percent to a seasonally adjusted annual rate of 295,000 units in August, according to newly released data from the U.S. Department of Commerce. The decline is from an upwardly revised, 302,000-unit rate in the previous month. "The number of foreclosed homes on the market continues to pose major challenges, not just to builders who have to compete against that low-priced product, but also to buyers who need to sell an existing home before trading up to a new one," said Bob Nielsen, Chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. "As the price data show, entry-level homes are generally driving the new-home market right now, and that's because first-time buyers don't have another home they have to sell. The only region to register an increase in new-home sales in August was the Midwest, where sales rose 8.2 percent. Meanwhile, the Northeast, South and West posted declines of 13.6 percent, 2.4 percent and 6.3 percent, respectively. "As builders in our recent surveys have been telling us, the lull in new-home sales continued even as mortgage rates held at extremely favorable levels in August. This is partly because continuing tight credit conditions are dissuading even well-qualified buyers, who are having trouble obtaining the good rates that are out there," said NAHB Chief Economist David Crowe. "However, on a positive note, today's numbers confirm that builders are wisely refraining from adding to the inventory of unsold new homes, which is currently at a 49-year low." The inventory of new homes for sale fell to 162,000 units in August, a new record low. However, due to the slower sales pace, the months' supply of new homes rose slightly, to 6.6.