New Home Sales

New home sales were down to an annualized rate of 309,000, falling well below the analyst consensus range of 345,000-390,000. Via Bloomberg:

"January is a difficult month for the housing sector, made difficult this year by still soft prices, heavy inventory, and the still distant April deadline for buyer credits. New home sales fell to a much lower-than-expected annual rate of 309,000 in January."

The housing credit, extended for first time home buyers had minimal to no effect on housing starts and prices. The median home price fell 5.6% in January, down to $203,500. Inventory jumped to 9.1 months, which erased 8 months of incremental improvement. Not good news generally. As home prices continue to fall, it will be more difficult going forward, for families to repair their personal balance sheets, as the value of equity in their homes will continue to deteriorate. This will have an adverse affect on consumer spending which is the largest component of GDP. Home prices falling will continue to lead directly toward depressed output levels.

families trying to repair personal balance sheets will be more difficult