New Home Sales Fall

Sales of new U.S. homes fell by 7.6% in December, earning 2009 a place in history as the worst year for new home sales since the Commerce Department started keeping records in 1963. The 2009 numbers were down an astounding 23% from 2008.

The median sales price of the homes that did sell in December was $221,300.  That’s down from $229,600 in 2008.

This phenomena exists in spite of government tax incentives for home buyers.  This means that new home sales should be expected to fall even further once those tax incentives expire.  The government cannot permanently prop up one sector of the economy at the expense of all others.

This will put further downward pressure on prices of new homes — which in turn will apply downward pressure on the values of existing homes. In addition, this is wreaking havoc with construction employment.  Those unemployed construction workers will be experiencing difficulties making the mortgage payments on their own homes, which depresses home values even further.

As long as new home sales remain at record lows, property values cannot be expected to recover.  At this time, I am recommending strongly against any investment in U.S. real estate.