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New Home Sales Off 15.1 Pct. in January

February 27, 2003
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WASHINGTON (Reuters) - Purchases of new homes dipped 15.1 percent in January to the lowest level in a year, the government said on Thursday, a surprisingly weak showing that may raise concerns the recent strength in the housing market could be running its course.

The Commerce Department said new home sales fell to a seasonally adjusted 914,000-unit annual rate in January, the slowest pace since January 2002. The percentage drop was the biggest one-month decline in nine years.

Analysts had expected sales to dip from December's record pace, which was revised to a 1.077 million-unit annual rate. But the size of the decline was much larger than expected. The average forecast of economists polled by Reuters had called for a 1.043 million annual rate.

"There may be an adverse weather effect at work here, or the drop in sales may simply reflect that the run of five straight readings over one million looked unsustainably strong given the level of mortgage applications," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

"Either way, this number now looks much too low to be sustained; sales will rebound over the next couple of months, though February might be hurt by the weather too," Shepherdson added.

In the geographical breakdown, three of the four regions recorded declines in sales. The number of homes for sale at the end of the month, 346,000, was the highest since July 1996. That drove the supply of new homes for sale to 4.5 months' worth, from 3.8 months' in December.

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