The big news in housing this week was the 8.5% drop in new home sales in March 2008, with sales down more than 36% from March 2007. The worse news was a $16,500 (6.8%) drop in new home prices from February. But the news buried a bit deeper and even more troubling is that the inventory of new homes for sale nationally now represents an 11-month supply at the current sales rate.
A couple of points may mitigate the damage. With the individual economic stimulus payments due out starting in May, bills currently in Congress to potentially give home buyers a $7,000-$7,500 tax credit (details still sketchy) and mortgage markets still experiencing difficulties, some buyers may be waiting. Other buyers may be waiting for bargains, after median home prices for new homes rose $28,100 from January to February - sales could rebound at the lower price point in April .
Some buyers may be holding off until the tax credit proposals are firmed up a bit. The version in the House would give a $7,500 tax credit to any first time home buyer for any home purchased; the Senate version would be $7,000, not limited to first time home buyers, but could only be used to purchase a foreclosed home or an unsold new home. Even if neither passes, eliminating the uncertainty could move some buyers off the sidelines.