Number of the Week: Dismal New Home Sales in 2011

By Phil Izzo

2.5: The number of new single-family homes sold per 1,000 households.

New home sales in 2011 hit their lowest level on record, but it’s difficult to express just how bad that is.

Just 302,000 new single-family homes were sold last year, according to Commerce Department data released on Thursday. That was the smallest number of new houses sold going back to 1963 when data were first collected.

Adjusting for population the figure looks even worse. There were about two and a half new homes sold for every 1,000 households in the U.S. last year. Prior to 2008 that number had fallen below five only once — in 1982. During the boom in 2005, it was above 11 new homes sold for every 1,000 households.

The numbers are so low that the Commerce Department can’t even say with confidence whether sales rose or fell on a month-to-month basis. The government estimates that sales were down 2.2% in December from November, but they say the actual figure could be anywhere from an 11% increase to a 15.4% drop. Without seasonal adjustments, Commerce estimates that just 21,000 new homes were sold in the entire country last month.

Signs have emerged of stabilization in other parts of the housing market, but single-family new home sales are likely to languish for some time. Home resales have increased a bit, but that creates competition for new homes. Foreclosures continue to keep inventories of existing homes high and prices low. Meanwhile, construction has increased but it has centered in the multifamily category. Tight lending standards make it difficult for buyers to take advantage of low rates, and can make less expensive apartments more attractive.

It’s possible that 2011′s record low of 302,000 represents the bottom for new home sales, but don’t count on it. The record has been broken three years in a row.

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