New home sales dropped in March by 7.1 percent, according to the Commerce Department. The median sales price dropped to $234,500, down 1 percent from February. Unsold new homes fell to 144,000 in March, the least since 1963. Homebuilders crippled by the poor economy have reduced construction.
The National Association of Realtors reported last week that even previously owned homes were selling at a lower rate, down 2.6 percent in March to a seasonally adjusted annual rate of 4.48 million units. The general rule of thumb is that it takes 6 million units in a healthy economy. The Realtors statistics indicate that every home built creates roughly 3 jobs a year, which means thousands of jobs are being lost in the present economy.
The bad news from March follows bad news in February, when home prices dropped in most major U.S. cities for a sixth straight month. Standard & Poor’s/Case-Shiller home-price index revealed that prices dropped in February from January in 16 of the 20 cities it followed. The decline in home prices has sunk the nationwide index to its lowest level since late 2002.
The home sales are plummeting despite the low interest rates. As Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, stated, “Mortgage rates are very, very low, but you really need to see strong job growth … It’s still a very long way to go before we get a full recovery.”