The pace of new home sales fell to a seven-year low in August, according to a government report Thursday that showed the battered housing and home building markets even weaker than forecasts.Can the entire housing market decline be blamed on just the mortgage meltdown or could it be that the affordability index, which is at an all time low, has played an equally important part of the housing market decline? In my area of New York it would be very hard to find many people who could afford their own home in today's market.
New homes sold at an annual pace of 795,000 in August, according to the Census Bureau, down 8 percent from the revised 867,000 sales pace in July.
It was the slowest pace of sales since June 2000, as buyers had trouble finding mortgages or selling their existing homes. Economists surveyed by Briefing.com had forecast that sales would fall to a pace of 825,000.
The report also showed the median price of a new home fell 7.4 percent from year earlier levels to $225,700 in the month, as prices were pressured by both the problems in mortgage finance and the excess supply of homes on the market.
The inventory of new homes on the market rose to an 8.2 month supply, as the glut of completed homes without a buyer was near a record high, with 180,000 completed homes listed for sale, just off the record high of 182,000 set in May of this year.
In the end it is all supply and demand and when the supply is overpriced the demand is low. How far will the prices fall? I believe in many areas you could see declines of 20% before this correction is over. The market needs to be affordable in order to grow. At present prices it is still unaffordable for most and this report on sales proves that point.