WASHINGTON The housing market plunged deeper into despair last month, with sales of new homes plummeting to their lowest level in more than 12 years.
The slump worsened even more than most analysts expected, heightening fears that the country might be thrust into a recession.
New-home sales tumbled 9 percent in November from October to a seasonally adjusted annual sales pace of 647,000, the Commerce Department reported Friday. That was the worst sales pace since April 1995.
"It was ugly," declared Richard Yamarone, economist at Argus Research. "It is the one sector of the economy that doesn't show any signs of life. It doesn't look like there is any resuscitation in store for housing over the next year," he said.
The housing picture turned out to be more grim than most anticipated. Many economists were predicting sales to decline by 1.8 percent to a pace of 715,000.
By region, sales fell in all parts of the country, except for the West.
In the Midwest, new-home sales plunged 27.6 percent in November from October. Sales dropped 19.3 percent in the Northeast and fell 6.4 percent in the South. In the West, however, sales rose 4 percent.
Over the last 12 months, new-home sales nationwide have tumbled by 34.4 percent, the biggest annual slide since early 1991, and stark evidence of the painful collapse in the once high-flying housing market.
"I think you can classify what we are seeing in the housing market as a crash," said Mark Zandi, chief economist at Moody's Economy.com. "Sales and home prices are in a free fall. The downturn is intensifying."
In Utah, homes sales were down 34 percent in Salt Lake County and more than 24 percent in Davis County in the third quarter of 2007, compared with the same period last year, according to market research firm Hendricks & Partners.
Nationally, the median sales price of a new home dipped to $239,100 in November. That is 0.4 percent lower than a year ago. The median price is where half sell for more and half for less.
In contrast, Hendricks & Partners reported the Beehive state bucked that trend, as the median price of homes in the Salt Lake area jumped just over 14 percent during the third quarter 2007, the second highest gain of any metro area in the country.
Would-be home buyers across the nation have found it more difficult to secure financing, especially for "jumbo" mortgages those exceeding $417,000. The tighter credit situation is deepening the housing slump. Unsold homes have piled up, which will force builders to cut back even more on construction and look for ways to sweeten the pot to lure prospective buyers.
"A lot of borrowers are being disqualified for loans. If you can't qualify for a mortgage, the game is over. For those who do qualify, it takes longer to get loans," said Brian Bethune, economist at Global Insight.
The housing market has been suffering through a severe slump following five years of record-breaking activity from 2001 through 2005. Sales turned weak, as did home prices. The boom-to-bust situation has increased dangers to the economy as a whole and has been especially hard on some homeowners.
Foreclosures have soared to record highs and probably will keep rising. A drop in home prices left some people stuck with balances on their home mortgages that eclipsed the worth of their home. Other homebuyers were clobbered as low introductory rates on their mortgages jumped to much higher rates, which they couldn't afford.Problems in housing are expected to persist well into 2008. The housing and mortgage meltdowns have raised the odds that the nation will fall into a recession. The economy's growth is expected to have slowed sharply to a pace of just 1.5 percent or less in the final three months of this year. The big worry is that the housing and credit troubles will force individuals to cut back on spending and businesses to cut back on hiring and capital investment, throwing the economy into a tailspin.
Contributing: Jasen Lee, Deseret Morning News.