New home sales fell 17% in February to the lowest level on record with cancellations ticking up again as buyers continue to deal with tighter mortgage underwriting standards.

The U.S. Census Bureau reported Wednesday morning that sales of newly constructed homes fell to a seasonally adjusted annual rate of 250,000 in February from a 301,000 rate in January.
February new home sales were off by 28% compared to a year ago. (The government began collecting such information back in 1968.)

The National Association of Home Builders (NAHB) was expecting an increase in sales — but this time the trade group is not blaming the weather, noting that the collapse in sales is consistent across the country. NAHB chief economist David Crowe noted that buyers are reluctant to get back into the market and the ones that are, sometimes find it difficult to get a mortgage.

"I hear from builders that buyers cannot get mortgages even with solid credit scores and downpayments," Crowe said.

Separately, in a new report analysts at Keefe, Bruyette & Woods noted that publicly traded homebuilders raised concerns about tightening mortgage credit in their fourth quarter securities filings. These builders noted that lenders are "demanding more stringent documentation, but in some cases higher FICO scores," KBW analysts said.

On average, builders reported a 25% cancellation rate in the fourth quarter, up two percentage points from a year ago.

The NAHB chief economist is still optimistic about the economic recovery in the U.S. but is worried about a housing recovery. An economic recovery "usually lifts housing, but the mechanics aren't working this time," Crowe said.

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