The US housing market is bleeding white owing to slump in new home sales by 1.8% in February 2008, worst hit in the decade.
According to the study conducted by the US Commerce Department, new home sales in the US fell by 1.8% in February 2008 amidst recession in the country’s property industry, worst hit in the last decade (Since 1995), as reported by RTE.
The Commerce Department also disclosed that new home sales fell to a seasonally revised annual rate of 590,000 properties. In the last 12 months, new home sales declined 29.8% as the slump in sales of multi-year property continued in spite of cut in interest rate by the Federal Reserve. Also, the average prices of new home spurned by 8.2% to reach to $244,100 in February 2008 from a month before.
The fall in the US housing industry persists further as the country is facing sever credit crunch arising from subprime mortgage market. The US housing industry is in dire state, continuously weighed down as many homebuyers have seen repossession of their homes after failing to pay their mortgage payment. Consequently, foreclosures have led to increase in the number of properties to put on sale and weakened the prices of homes.
Besides, tight lending practices have created difficulties for homebuyers to access credit and potential buyers are hesitating to buy properties in an environment when prices are declining, resulting in downfall of the US housing industry. Retardation in economy and rising unemployment are too forcing people to stay away from housing sector and subsequently are holding back growth in the housing sector.
However, the US economy will strongly recover than earlier through tax rebates in the recently passed economic aid plan of $168 Billion. Therefore, many homebuilders who have become bankrupt or their financial system has completely dismantled in the last two years (2006-2007) downturn, have reduced the prices of several developments with a hope to boost sales of new homes.
According to a Senior Research Analyst at RNCOS, “The US housing market is suffering from poor economic conditions. Hence, homebuilders have to bring down rates of new homes and reduce the construction of new homes. This will assist to counterbalance the mortgage defaults, leading to increase in more homes in the market and will ultimately attract more consumers to the housing market.”
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