November 29 2010 (Shirley Allen)

The Commerce Department has reported that the sales of new single-family homes declined 8.1 percent to a seasonally adjusted annual rate of 283,000 units in October, while the median home price dropped to the lowest point in seven years.

It was the fourth time the sales rate has dropped in the past six months. New home sales are just 2.9 percent above August’s pace of 275,000 units — which was the lowest level dating back to 1963.

Meanwhile, the median sale price for a new home declined 9.4 percent to $194,900 compared to last year and was just $800 higher than it was in October 2003. The inventory of new homes for sale slid 0.5 percent to 202,000, an eight-month supply. A six-month inventory is considered good.

The decline in new home sales followed a report Tuesday that sales of previously occupied homes fell 2.2 percent in October, to a seasonally adjusted annual rate of 4.43 million units. That left the sales pace for previously occupied homes 38.9 percent below a peak of 7.25 million units set in September 2005.

The October setback in new homes represented weakness in all parts of the country except the South, where sales posted a 3.1 percent rise. New home sales fell 23.9 percent in the West, 20.4 percent in the Midwest and 12.1 percent in the Northeast.

The nation’s homebuilders are facing competition from heavily discounted foreclosed properties and potential short sales. Many economists believe it could take three years for the industry to get back to a healthy annual rate of sales of around 600,000 homes.

Tags: single-family homes, median home price, home sales rate, median sale price, home inventory, homebuilders