As if the worse year in new home sales (2010) wasn’t bad enough, 2011 is shaping up to be as bad if not worse. February 2011 was the worse month on record for new home sales, according to the commerce department. Sales sank 17% to an annual rate of 250,000. Mike Larsen of Larsen research had this to say, “These latest home sales figures are shockingly bad. The government has been tracking new home sales for 48 years and we have never seen things this bad. Any momentum the housing sector may have had in 2010 has been lost as the calendar turned into 2011. Median prices are also falling over 9% year on year which leaves prices at the lowest levels since 2003. If there was any silver lining in the report it may be that new home builders are responding to the record slump in demand with fewer buildings being built so the raw number of new homes on the market is the lowest it has been since the 1960s.” This could also boost residential demand for home improvement as more folks opt to improve and update existing homes.

Any buyers that are out there are opting for near new homes and foreclosures at slashed prices instead of new homes. Rising gas prices, persistently high unemployment, and tighter credit are most certainly putting an added crimp in market demand for new housing. There also seems to be a self fulfilling negative perception about future house prices. The housing model of borrowing hundreds of thousands of dollars works when houses appreciate, but does not seem to work when, as we have now prices remain flat to negative.

New Home Sales Slump in February