Why New Home Sales Are So Bad

Ugh! New home sales, which measure contracts signed, fell to an all-time low of 250,000 annualized sales in February (they've been collecting records since the early 1960s) — well below the 288,000 expected.

CNBC Investor Guide to Spring Real Estate 2011 - See Complete Coverage

All four regions saw declines. The median price for new homes fell 8.9 percent from a year ago.

This follows the disappointing February existing home sales (which measures closings, not contracts signed) out on Monday, which came in at 4.88 million annualized sales, below the roughly 5 million expected.

It's a pretty simple story: existing home sales are continuing to sell at a much bigger discount to new home sales than has historically been the case.

In other words: buyers perceive more value in buying an existing home. This means more pressure to lower prices on new homes, and — as we have seen — lower building starts and permits.

Housing—Second Opinions:

• Is Housing Really in Recovery?
• Housing to Lead Markets Higher: CIO

_____________________________
Bookmark CNBC Data Pages:

• The Dow 30 — in Real Time
• Oil, Gold, Natural Gas Prices Now
• US Dollar, Minute by Minute

_____________________________

_____________________________

Want updates whenever a Trader Talk blog is filed? Follow me on Twitter: twitter.com/BobPisani.

Questions? Comments? [e-mail]