New homes sales fell nearly 15% in December from November to a level not seen since 1981 as builders wait to see what Congress is going to do to help the housing market.
They are also saying low appraisals are causing many cancellations. The U.S. Census Bureau reported that sales of new single-family homes fell from a seasonally adjusted annual rate of 388,000 in November to 331,000 in December.
Construction activity has fallen by 45% since December 2007. Builders are facing the worst market conditions in 40 years. Construction financing is tight, appraisers are valuing newly constructed homes at foreclosure prices and sales contract cancellations are running at a 30% rate.
"Appraisals are killing sales," said Bernard Markstein, director of economic forecasting at the National Association of Home Builders (NAHB). "Some appraisals are coming in at below building costs," he said.
The NAHB is urging Congress to extend a $7,500 first-time homebuyer tax credit to all buyers as a way to stimulate sales and increase the tax credit to 10% of the sales price. But it appears Congress is not moving in that direction.