New Home Sales Slip To 16 1/2-Year Low

Source : The Business Times, April 25, 2008

LATEST US DATA

(NEW YORK) Sales of new homes plunged in March to the lowest level in 16 1/2 years as housing slumped further at the start of the spring sales season.

The median price of a new US home in March compared to a year ago fell by the largest amount in nearly four decades.

The Commerce Department reported yesterday that sales of new homes dropped by 8.5 per cent last month to a seasonally adjusted annual rate of 526,000 units, the slowest sales pace since October 1991.

The median price of a home sold in March dropped by 13.3 per cent compared to March 2007, the biggest year-over-year price decline since a 14.6 per cent plunge in July 1970.

The dismal news on new home sales followed earlier reports showing that sales of existing homes fell by 2 per cent in March.

Housing, which boomed for five years, has been in a prolonged slump for the past two years with sales and home prices falling at especially sharp rates in formerly boom areas of the country.

For March, sales were down in all regions of the country, dropping the most in the northeast, a decline of 19.4 per cent.

In other economic news, orders to factories for big-ticket manufactured goods fell for a third straight month in March, the longest string of declines since the 2001 recession, while applications for unemployment benefits fell by 33,000 to 342,000.

The Commerce Department said that demand for durable goods dropped by 0.3 percent last month, a worse-than-expected performance that underscored the problems manufacturers are facing from a severe economic slowdown. The last time orders fell for three consecutive months was from February to April of 2001, when the country was sliding into the last recession.

The weakness in manufacturing orders was led by a 4.6 percent drop in orders for autos, a sector that has been hard hit by soaring gasoline prices and the weakening economy, which have cut sharply into car sales. Orders in the category that includes home appliances fell by 6.6 percent. This industry has been hurt by the two-year slump in home sales.

Manufacturing has held up better than in past economic downturns as a drop in the dollar makes American products cheaper to foreign buyers.

Gains in exports and lean inventories are keeping assembly lines moving, helping to offset slowing US sales and softening the severity of a possible recession.

'Manufacturing is proving to be fairly resilient,' Julia Coronado, a senior economist at Barclays Capital here, said before the report.

'The manufacturing sector is benefiting from some of the strength in the global economy that is helping it offset some of the weakness we've seen locally.'

Yesterday's figures were one of the last that may influence forecasts ahead of the Commerce Department's advance report on first quarter gross domestic product due on April 30. -- AP, Bloomberg