New home sales continued to drop in December, falling by roughly 5% to 604,000, which is the lowest reading since Feb. 1995 and the largest drop ever recorded, reported the National Association of Realtors. According to research from RBS Greenwich Capital Markets, the new home sales pace has suffered disproportionately in recent months versus existing home sales, which have been much closer to stable since Sept. New home sales fell by 41% from December 2006 to December 2007. The leveling off of the National Association of Home Builders index over the past few months and anecdotal reports from builders imply that the market could find a bottom by the spring, said Greenwich Capital, although sales levels are are probably going to stay at historically depressed levels. "The new home inventory situation in December highlighted the trends that have been in place for some time," analysts at the firm noted. "The number of completed homes for sale rose slightly yet again in December, setting another all-time high. Meanwhile, the number of homes for sale but not yet started slid again in December and has fallen by 32% since peaking in June 2006. This aggregate has probably managed about 60% of the necessary drop from its high, so it has a ways to go still." Analysts added that inventories of homes for sale that are under construction fell significantly in December, which continued a steep downward trend in place since the peak in mid-2006. Greenwich Capital said that the December level for this piece of inventories was the lowest since February 2004 and is probably not far from normal levels. They said that the steep cutbacks in housing starts have allowed considerable progress in slowing the supply in the pipeline. But, as long as new home sales are falling, builders will not be able to pare stocks, especially of finished homes, to desired levels very quickly, Greenwich Capital analysts said.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.