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Spending on new homes in the Tucson area dropped by more than $567 million in 2007, according to a report by a local housing market consultant.

The total amount spent on new homes last year was about $1.67 billion, according to the December Southern Arizona Housing Market Letter from consultant John Strobeck. That was down about 25 percent from the previous year, likely the steepest drop in more than a decade, Strobeck said.

"It virtually has not decreased any year until now," said Strobeck, owner of Bright Future Business Consultants, who has been forecasting Southern Arizona home-building trends for 13 years.

Permit activity for new homes also hit a low in 2007, falling to 5,098 — slightly below the number in 1996, the report said. In another unusual twist for 2007, the number of new homes sold exceeded the number built, indicating that the market was working off excess inventory from 2006, Strobeck said.

The number of new homes sold in December fell to 496, down by 40 percent from the same month a year before, the report said. Median and average prices for new homes also dropped in December to $220,000 and $275,000, respectively.

Resale closings also showed a steep drop of about 35 percent from the same month a year ago, the report said. Resale median and average prices also fell compared with December 2006.

Strobeck said he expects this year's new-home sales to also be "extremely low" based on the drop-off in permits. With inventory levels remaining high for resale homes, Strobeck said he expects prices for resale homes will have to drop by about $10,000 to $15,000 next year to reduce the inventory and spur more interest in new homes.