New Home Sales Fall to Lowest Level in 17 Years
April 24 2008 - Sales of new homes in March plummeted to the lowest level since the housing recession of the 1990s, the government said on Thursday, as inventories rose to the highest point in more than a quarter century.
Buyers vanished from the housing market last month at a swift rate. Sales of new homes fell 8.5 percent, a far sharper decline than economists had forecast.
Sales are running at an annual rate of 526,000 after adjusting for seasonal factors, the lowest point since October 1991.
Adding to the gloom, the Commerce Department lowered its initial estimate for February sales as well, to a 5.3 percent decline from 1.8 percent.
At the current sales rate, it will take 11 months for builders to work off the current backlog, the biggest inventory pile-up since 1981.
“The housing sector will continue to act as deadweight on overall growth throughout the remainder of 2008,” an economist at IdeaGlobal, Joseph Brusuelas, wrote in a note to clients.
Sales fell in every region of the country, with the Northeast suffering the steepest drop, 19.4 percent.
Prices continue to fall as well, which could discourage would-be buyers from entering the market. The median price of a new home dropped in March to $227,600, down 13.3 percent from a year ago. That drop followed price declines of 2.6 percent in February and 8.5 percent in January.
The housing slump, coupled with the current slowdown, have weighed heavily on manufacturing, as Americans shy away from large purchases.
Facing a sharp drop in demand, many businesses have become reluctant to make large investments in capital equipment. The government reported on Thursday that manufacturing orders fell again in March, the third consecutive monthly decline.
Orders for durable goods, which are intended to last three years or more, dipped 0.3 percent last month to a seasonally adjusted $212.2 billion, down $0.7 billion from February, according to the Commerce Department.
Still, there were some signs of stabilization, suggesting that businesses have bet that a rise in foreign demand will help prop up bottom lines even as the domestic economy grinds to a halt.
A closely watched barometer of business spending, which measures orders of civilian capital goods excluding aircraft, flattened out in March after dipping 2 percent in February.
Sales of heavy-duty manufacturing machinery rebounded in March after a record decline in February, and orders of fabricated metal products also increased.
The government also revised higher its estimates for the first quarter of 2007. Durable goods orders fell 0.9 percent in February and 4.4 percent in January, an improved showing from the initial readings of 2.6 percent and 4.7 percent.
Although some economists had expected a small rise in durable goods orders, the report was considered relatively mild after the results of recent months.
Rob Carnell, an economist at ING Bank in London, said the data could lend support to the “it will all be fine” camp of analysts who believe the nation will avoid a prolonged recession.
Some trouble spots remained. Transportation orders decreased 4.6 percent, a particularly steep decline, and orders of computers and communications equipment also fell. Motor vehicle orders dipped 4.6 percent as automobile sales continued to stumble. Orders of defense capital goods plummeted nearly 20 percent.
In a separate report on Thursday, the Labor Department reported that the number of newly laid-off workers filing claims for unemployment benefits declined last week.
Claims for unemployment benefits fell by 33,000 last week to 342,000, the government said. The four-week moving average for claims, which tends to smooth out weekly volatility, fell by 7,250 to 369,500.
New-Home Sales Fall to Low Last Seen in 1990s
by MICHAEL M. GRYNBAUM | New York Times