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Home Sales Continue To Nosedive

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By JEANNINE AVERSA, The Associated Press

Published: December 29, 2007

WASHINGTON - The housing market plunged deeper into despair last month, with sales of new homes plummeting to their lowest level in more than 12 years.

The slump worsened even more than most analysts expected, heightening fears that the country might be thrust into a recession.

New-home sales tumbled 9 percent in November from October to a seasonally adjusted annual sales pace of 647,000, the Commerce Department reported Friday. That was the slowest sales pace since April 1995.

"It was ugly," said Richard Yamarone, economist at Argus Research. "It is the one sector of the economy that doesn't show any signs of life. It doesn't look like there is any resuscitation in store for housing over the next year," he said.

The housing picture turned out to be more grim than most anticipated. Many economists were predicting sales to decline by 1.8 percent to a pace of 715,000.

By region, sales fell in all parts of the country, except for the West.

In the Midwest, new-home sales plunged 27.6 percent in November from October. Sales dropped 19.3 percent in the Northeast and 6.4 percent in the South. In the West, however, sales rose 4 percent.

Over the past 12 months, new-home sales nationwide have tumbled by 34.4 percent, the biggest annual slide since early 1991, and stark evidence of the painful collapse in the once high-flying housing market.

"I think you can classify what we are seeing in the housing market as a crash," said Mark Zandi, chief economist at Moody's Economy.com. "Sales and home prices are in a free fall. The downturn is intensifying."

The median sales price of a new home dipped to $239,100 in November. That is 0.4 percent lower than a year ago. The median price is where half sell for more and half for less.

Would-be home buyers have found it more difficult to secure financing, especially for "jumbo" mortgages - those exceeding $417,000. The tighter credit situation is deepening the housing slump. Unsold homes have piled up, which will force builders to cut back even more on construction and look for ways to sweeten the pot to lure prospective buyers.

"A lot of borrowers are being disqualified for loans. If you can't qualify for a mortgage, the game is over. For those who do qualify, it takes longer to get loans," said Brian Bethune, economist at Global Insight.

The housing market has been suffering through a severe slump after five years of record-breaking activity from 2001 through 2005. Sales turned weak, as did home prices. The boom-to-bust situation has increased danger to the economy as a whole and has been especially hard on some homeowners.

Foreclosures have soared to record highs and probably will keep rising. Declining home prices have left some people stuck with balances on their mortgages that eclipse the worth of the residence. Other home buyers were clobbered as low introductory rates on their mortgages jumped to much higher rates they couldn't afford.

Problems in housing are expected to persist well into 2008 - a major election year.

The housing and mortgage meltdowns have raised the odds that the country will fall into a recession. The situation has given Democrat and Republican politicians- including those who want to be the next president - plenty of opportunities to spread blame.

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