U.S. data point to downturn
Sales of new homes fell in February for the fourth straight month, pushing activity down to a 13-year low as the steep slump in housing continued.
The Commerce Department reported that new-home sales dropped 1.8% last month to a seasonally adjusted annual rate of 590,000 units, the slowest sales pace since February 1995. The decline was slightly worse than expected.
The median price of a home sold last month fell to $244,100, down 2.7% from a year earlier.
The prolonged slump in housing has dragged down overall economic activity. Many analysts believe that the slump could combine with various other problems including a severe credit crunch, soaring energy prices and plunging consumer confidence, to push the country into a recession.
The number of unsold homes on the market at the end of the month represented a 9.8-month supply at the February sales pace, the same as in January. That was the highest inventory level in more than 26 years and reflects the fact that rising foreclosures are dumping even more homes on an already glutted market.
Sales dropped the most in the Northeast, falling by 40.6%. Sales were also down in the Midwest, dropping by 6.4%, but gains were seen in the South and West of 5.7% and 0.7%, respectively.
Many analysts believe that the slump in housing, which began in 2006, could last into 2009. It was reported Tuesday that the Standard & Poor’s/Case-Shiller index of home prices fell 11.4% in January from a year earlier, the biggest year-over-year decline in the history of the index.
Analysts say the housing market is being hurt by tighter lending conditions as banks react to soaring mortgage defaults and the reluctance of prospective buyers to make a decision, fearing that prices have further to fall.
In other economic news, factory orders for big-ticket goods fell 1.7% in February, a second consecutive decline.
The declines in orders for durable goods -- items expected to last at least three years -- showed up in a number of areas. Demand for manufacturing equipment plunged 13.3%, the largest amount on record, while orders for nondefense capital goods excluding aircraft, the category seen as a good proxy for business investment, fell 2.6%, the biggest decline in four months.
