New-Home Sales Down to 1995 Levels

But the pace of decline could be slowing.

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Sales of new homes fell by 1.8 percent in February, from January, to levels not seen since 1995, according to a government report released this morning. The full report is here.

Here's the good news: "The rate of decline appears to be slowing after the plunge last fall," says Ian Shepherdson, the chief U.S. economist of High Frequency Economics. "There have been false dawns before, so it would be unwise to call the bottom at this point, but the leveling off in the [National Association of Home Builders] survey is consistent with this idea."

Still, Shepherdson warns the coast is certainly not clear yet:

The fly in the ointment though is the still-huge inventory overhang which, at 9.8 months, is enough to keep downward pressure on prices for the foreseeable future. The risk is that the bargain-hunters now in the market will get badly burned, sparking another downward lurch in sales from current levels.