The Housing Chronicles Blog: Sales of new homes falls to 17-year low

Thursday, September 25, 2008

Sales of new homes falls to 17-year low


New home construction fell by over 11% during August to the lowest level since 1991, while median prices slid by 5.5%. And yet homes still remain unsold due to the lack of financing. From an AP story via MSNBC.com:

New home sales tumbled in August to the slowest pace in 17 years, while mortgage rates spiked this week, increasing pressure on the new chief executives of Fannie Mae and Freddie Mac to help stabilize the housing market.

New homes sales fell by 11.5 percent in August to a seasonally adjusted annual sales rate of 460,000 units, the slowest sales pace since January 1991, the Commerce Department said Thursday.

The median price slid 5.5 percent to $221,900...

“We have not seen any (mortgage) program changes, no assistance for clients to make anything different,” said Jodi York-Caraballo, owner of Green Valley Mortgage Inc. in Bloomingdale, Ill. “They haven’t eased up on lending restrictions.”

Fannie Mae’s new chief executive, Herbert Allison told lawmakers Thursday that the company is evaluating the higher fees and tighter lending standards that the company put in place over the past year. Fannie and its sibling company, Freddie Mac, were seized by government regulators nearly three weeks ago.

“We are looking at every aspect of our business,” Allison said. “We are examining our underwriting and pricing standards to assure that we strike the right balance between expanding our activities and safeguarding taxpayers...

On Capitol Hill, Democrats and Republicans traded barbs about who was to blame for Fannie and Freddie’s woes.

Republicans bemoaned the companies’ lobbying influence in Washington and said they had long pushed efforts to rein in the two companies. Democrats said the companies played a valuable role in supporting home ownership noted that Wall Street banks — not Fannie and Freddie — led a dramatic decline in lending standards...

Dismal economic news is adding to the sense of urgency.

Besides the weak housing report, the government said Thursday that new claims for unemployment benefits shot up last week to the highest level in seven years. Orders to factories for big-ticket manufactured goods fell last month by 4.5 percent, far more than expected.

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