More gloomy news for the housing market is expected with the release of the U.S. new home sales report for October, which is expected to reach a 17-year low.
Economists polled by Bloomberg expect new home sales to fall a further 5% to an annualized pace of 441k, which would mark the lowest point since sales fell to 401k in January 1991. In September, sales rebounded slightly, rising 2.7% to 464k.
"New home sales likely fell faster than resales in October, with the latter supported by sales of cheap foreclosed properties," said Sal Guatieri from BMO Capital Markets. "This suggests housing starts will continue to break new all-time lows in the months ahead, in turn keeping GDP in full contraction mode."
He noted that the renewed weakness in house sales, coupled with the massive overhang of unsold homes, points to persistent housing deflation.
All recent indicators are pointing to a week showing in the new home market.
Last week, the Commerce Department reported that housing starts -- construction of new homes --plunged 4.5% in October to their lowest level on record, dating back to 1959. Construction fell to an annual rate of 791,000.
Meanwhile, the NAHB/Wells Fargo Housing Market Index slumped to an all-time low of 9, implying that home builders are deeply pessimistic about the outlook for the housing sector.
"November's HMI numbers imply that business conditions deteriorated significantly in October and November," noted economists from IHS Global Insight. "We should therefore expect big drops in new home sales during the last three months of 2008."
In September, the median price of new homes fell to $218,400, down from $220,400 in August. Inventories fell to a pace of 10.4 months in September, down from an 11.4-month supply in August.
The new home sales report will be released by the U.S. Census Bureau at 10 a.m. EST.
By Stephen Huebl and edited by Sarah Sussman
©CEP News Ltd. 2008