- The Washington Times - Thursday, March 27, 2008


Sales of new homes fell last month for the fourth straight month, pushing activity down to a 13-year low. While the rate of decline has slowed, the worst slump in more than two decades has not run its course, analysts said.

The 1.8 percent drop sent the annual sales rate down to 590,000 units in February, the Commerce Department reported yesterday. That was the slowest pace since February 1994 and down 57.5 percent from the sales peak of 1.389 million units in July 2005.

The median price of a house sold last month dropped to $244,100, which is 2.7 percent less than the level of a year ago. The median sales price is the point where half the homes sold for more and half for less.

A report by Standard & Poor’s/Case Schiller on Tuesday showed that 16 of 20 major cities reported record annual price declines in January compared with a year ago.

Yet a separate report Monday showed that sales of existing homes posted an increase of 2.9 percent in February, the first gain after six months of declines. Nonetheless, analysts said they do not expect a sustained rebound for many months in the market for resales or new homes, primarily because the number of unsold houses is so high.

The Commerce Department report showed that the number of unsold houses on the market at the end of the month was a 9.8 months’ supply at the February sales pace, matching the 26-year high set in January.

Builders have cut construction and offered heavy discounts. Such efforts have been offset by record mortgage defaults, dumping even more houses on the market.

Analysts said buyers’s demand remains weak heading into the spring sales season. Among the reasons are difficulty in getting loans because of tighter standards and potential buyers’s hesitancy to commit to a purchase in an environment of falling prices.

Sales of new homes dropped the most in the Northeast, by 40.6 percent, and fell 6.4 percent in the Midwest. Sales rose 5.7 percent in the South and 0.7 percent in the West.

David Seiders, chief economist at the National Association of Home Builders, said builders have seen an increase in the traffic through model homes, though that has not meant higher sales yet. He said he thought sales would bottom out this spring. The rebound in the second half of the year, he said, will be slow and there could be setbacks.

A second report yesterday showed the manufacturing sector was under more stress. Orders for big-ticket durable goods dropped by 1.7 percent in February, the second consecutive monthly decline.

While demand for commercial aircraft rebounded, orders for motor vehicles fell, demand for machinery plunged by the largest amount on record and a category that tracks business investment declined for a second straight month.

Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI, said the slump in business investment reflected all the problems factories are facing — economic uncertainty, tighter credit conditions, rising costs for energy and raw materials.

Analysts said some problems would be offset by continued strong demand for U.S. exports, helped by the weaker dollar, which is making U.S. goods more competitive on overseas markets.

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