New home sales: Biggest drop ever

New home sales: Biggest drop ever
Weak December sales caps 2007's record slide, with prices for the month off sharply from a year earlier.
NEW YORK (CNNMoney.com) -- New home sales posted the biggest drop on record in 2007, according to the government's latest look at the battered housing market, as a year that saw a meltdown in the mortgage market and a drop in home values ended with yet more signs of weakness.
December sales came in at an annual rate of 604,000, the Census Bureau report showed, down from 634,000 in November, which was also revised lower.
The reading was well below the consensus forecast of 645,000, according to economists surveyed by Briefing.com.
The weak December sales left full-year new home sales at 774,000, down 26 percent from the 1.05 million sales in 2006. That was the biggest drop since the government started tracking new home sales in 1963, surpassing the 23 percent decline posted in 1980.
No bottom yet Adam York, an economist with Wachovia, said the report confirms fears that the housing market won't bounce back anytime soon.
"We're expecting sales to decline into at least mid-2008," he said. "We think housing still has a long way to go."
The mortgage market woes were a major part of the problem for new home sales in 2007. Homes financed by conventional mortgages fell 27 percent, the biggest drop since the government started tracking financing in 1988.
But the weakness in prices made buyers reluctant to jump into the market, even if the availability of financing was not an issue. The number of new homes bought with cash fell nearly 24 percent, while mortgages guaranteed by federal agencies such as the Federal Housing Administration or the Veterans Administration fell 16 percent.