New-Home Sales, Key Index Fall : * Economy: The housing barometer drops steeply in December. The index of leading indicators also is down. There are signs that home sales are picking up, however.
The government’s barometer of future economic activity dropped in December, and sales of new houses plunged sharply, the Commerce Department reported Friday, providing more evidence that the economy remains stalled and an imminent recovery is unlikely.
The index of leading indicators, a composite of several statistics designed to measure economic conditions, dipped 0.3% in December after an identical decline in November.
Sales of new single-family homes dropped 6.6% from November, bringing sales for all of 1991 to the lowest level since the 1982 recession.
The new figures appear to confirm indications that the long-awaited recovery has yet to begin and that conditions are likely to remain stagnant until midyear.
“The economy has been dead in the water for six months,” said Lyle Gramley of the Mortgage Bankers Assn. in Washington. “When I look for signs that it’s coming out of it, I don’t see any. Nor do I see any signs that it’s going over the cliff.”
Some economists had hoped that the Commerce Department figures, which are supposed to predict the health of the economy three to six months ahead, would stabilize or edge upward. But most of the industrial indicators delivered gloomy news instead.
They included a drop in orders for new plants and equipment, falling orders for consumer goods and a decrease in unfilled factory orders. They also reported faster delivery times--another indication that orders declined.
Four indicators showed improvement: The number of building permits jumped; the work week lengthened; stock prices rose, and prices for raw materials increased, suggesting more demand.
Despite the generally dismal numbers, some economists saw reason for hope. Treasury Secretary Nicholas F. Brady said he is optimistic because consumer debt is lower and corporations are relying less on borrowing.
“American business in 1992 is going to have a crackerjack year,” Brady told a Naples, Fla., meeting of the National Assn. of Manufacturers. “It’s around the corner. You can feel it.”
Although home sales were down in December, Gramley said, “there is an abundance of anecdotal evidence that the housing numbers will improve for January.”
Sales of single-family homes dropped to a seasonally adjusted annual rate of 522,000 last month after jumping 7.9% in November. The November advance, revised sharply upward from first reports of a 3.8% gain, made the December loss even more dramatic. The late-year sluggishness helped keep 1991 sales at a nine-year low of 504,000 units.
Yet some lenders and developers have reported increased loan applications and heavier traffic through model homes in January. And the lowest mortgage rates in nearly two decades are expected to spur sales in the first quarter.
“Consumers are sensing that rates are bottoming out and now is the time to buy,” said Lynn Reaser, vice president and senior economist for First Interstate Bancorp in Los Angeles. “The recent boom in refinancing might well spill over to new-home sales and resales. In California, we are hearing about very significant increases” in sales, Reaser said.
