New-Home Demand Continues to Weaken

Sales of new homes continued to trend downward in October, falling by 5.3 percent for the month and by 40 percent on a year-over-year basis, according to the National Association of Home Builders (NAHB). Further, new-home sales now are down by 69 percent from their cyclical peak in July 2005.

NAHB’s single-family Housing Market Index (HMI) fell to 9 in November, a new record low, 9. The series was begun in January 1985.

The November reading was five points below the previous low in October of this year and was down from 72 at the cyclical peak in June 2005.

All three HMI components — current sales, sales expectations and buyer traffic — were at record lows in November and new lows also were posted for all four regions of the country.

Preliminary tabulations point toward further broad-based erosion of the HMI in December.

Sales of existing single-family homes were down by 3.3 percent in October, although this series has essentially been rattling sideways since late last year.

However, foreclosure-related sales of existing homes have been rising sharply during this period, creating more and more cut-rate competition for home builders as those units have come onto the markets.