Despite a record drop in prices, sales of new homes flattened out in August after four months of strong increases, the Commerce Department estimated Friday.
Sales of new homes rose a statistically insignificant 0.7% in August to a seasonally adjusted annual rate of 429,000 from a downwardly revised 426,000 in July, which was previously reported as 433,000.
Sales were down 3.4% from a year earlier, but were up 30% from the low in January.
Through the first eight months of 2009, sales were down 28% compared with the same period a year ago.
Sales were weaker than the 440,000 annual pace expected by economists surveyed by MarketWatch. See Economic Calendar.
Government statisticians have low confidence in the monthly report, which is subject to large revisions and large sampling and other statistical errors. In most months, the government isn't sure whether sales rose or fell. The standard error in August, for instance, was plus or minus 16.2%. Read the full government report.
The government says it can take up to five months to establish a new trend in sales. Over the past five months, sales have been on a 394,000 annual pace, up from 375,000 in the five months ending in July. The five-month average bottomed at 346,000 in May.
The median sales price fell a record 9.5% from July to August. The median price of $195,200 was 11.7% lower than the median price in August 2008. The drop in the median price in August likely reflected a surge in demand for starter homes from first-time home buyers, who can get an $8,000 taxpayer subsidy if they act before Nov. 30.
Inventories of unsold homes continued to fall in August, dropping 3% to 262,000, the fewest in 17 years. At the August sales pace, the inventory represented a 7.3-month supply, the lowest since January 2007. The inventory has fallen by a record 36% in the past year.
Home builders face stiff competition from a rush of foreclosures onto the market.
The number of houses for sale that were still under construction fell 3.5% to a record low 110,000 (the data go back to 1963).
The number of completed homes for sale fell 5.8% to 114,000. Once completed, it's taking a record 12.9 months to sell.
Sales jumped 12% in the West and were flat in the South, the biggest region for new homes. Sales dropped 16% in the tiny Northeast market and fell 5.8% in the Midwest.
