Dow+89.64up+0.79%
11,502.51
Nasdaqunch0.00%
2,382.46
S&Punch0.00%
1,281.66
Home-buying guide © Ingram Publishing / SuperStock

Extra10/26/2006 10:09 AM ET

New home prices plummet 9.7%

The year-over-year decline in September was the biggest in 35 years and came despite an increase in buyers, the government says.

By MSN Money and wire reports

The Commerce Department today reported more bad news for the nation's once-booming housing market: The median price for a new home sold in September dropped 9.7% from a year earlier.

That took the median price back down to the lowest level in about two years and marked the biggest year-over-year decline in more than 35 years.

The news follows on the heels of Wednesday's report that sales of existing homes fell in September for the sixth consecutive month.

The median price for a new home sold in September was $217,100, the government said. It was the lowest median price for a new home since September 2004 and the sharpest year-over-year decline since December 1970. The weakness in new home prices was even sharper than a 2.5% fall in the price of existing homes last month, which had been the biggest drop on record.

The price decline for new homes came while the sales pace picked up, rising by 5.3% to a seasonally adjusted annual rate of 1.075 million homes. It marked the second consecutive increase in sales after three months of declines.

The declines in prices served to underscore the severity of the correction in the once-booming housing market, which had seen sales of both new and existing homes soar to record levels for five consecutive years, propelled by the lowest mortgage rates in more than four decades.

This year, with mortgage rates rising through midsummer, sales have cooled considerably, with housing expected to trim more than a percentage point from overall growth in the last half of the year.

The debate is whether the slowdown will be enough to push the country into an outright recession. The Federal Reserve, recognizing the weakness in housing, halted a two-year string of interest rate increases in August and left rates unchanged for a third straight meeting on Wednesday.

The Fed, however, gave no indication that it planned to start cutting rates because of the weakness in housing, saying it was still concerned that inflation remained too high. The 5.3% rise in new home sales in September followed a 3.8% rise in August and was the biggest one-month gain since an 8% increase in March. However, sales had fallen for three straight months from May through July.

The rise in sales last month was led by a 23.9% jump in the West. Sales were also up 6.9% in the South. However, sales fell by 34.5% in the Northeast and were down 6.3% in the Midwest.

Rate this Article

Click on one of the stars below to rate this article from 1 (lowest) to 5 (highest). LowRate it 1Rate it 2Rate it 3Rate it 4Rate it 5High

advertisement

Fund data provided by Morningstar, Inc. © 2005. All rights reserved.
StockScouter data provided by Gradient Analytics, Inc.
Quotes supplied by Interactive Data.
MSN Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.