MichaelC 160 Report post Posted January 29, 2009 New Homes Sales Fall By Bob Willis Jan. 29 (Bloomberg) -- Sales of new homes in the U.S. fell in December to the lowest level on record, creating an unprecedented glut of unsold properties that casts doubt on any recovery in the industry this year. Purchases dropped to an annual pace of 331,000, lower than all 70 forecasts in a Bloomberg News survey, Commerce Department figures showed in Washington. Other reports today said orders for durable goods slumped for a fifth month and a record number of Americans were collecting jobless benefits. The collapse in demand for homes means builders are still constructing a surplus of properties, and signals more pressure on prices. The intensifying crisis will make it harder for President Barack Obama to arrest the industry’s decline with proposed tax breaks and steps to slow mortgage foreclosures. “Builders are slashing production, but it’s difficult for them to keep up with sales that are falling so fast,” said Nigel Gault, chief U.S. economist at IHS Global Insight, in Lexington, Massachusetts, who at 345,000 had the lowest estimate of economists surveyed. “New homes are getting cheaper, but you can’t get credit so you can’t buy.” Unadjusted for seasonal patterns, only 23,000 Americans bought new homes last month, with just 2,000 purchases in the Northeast region. Economists’ Forecasts: Economists had forecast new home sales would drop to a 397,000 pace, according to the median forecast in a Bloomberg survey of 70 economists. Estimates ranged from 345,000 to 412,000. Commerce revised the November sales pace down to 388,000 from the 407,000 rate previously reported. Orders for durable goods fell 2.6 percent in December, more than anticipated, other figures from Commerce showed. The declines signals a slump in business spending will deepen and prolong the recession. A Labor Department report showed a record 4.8 million fired workers received unemployment benefits in the week ended Jan. 17. First-time filings last week increased 3,000 to 588,000. The median price of a new home decreased 9.3 percent from the same month last year to $206,500, the lowest in five years. Sales of new homes were down 45 percent from December 2007. For the full year, sales fell a record 38 percent to 482,000, the fewest since 1982, Commerce said. The median price fell 7 percent, the most since 1970, to $230,600. Glut of Properties: The supply of homes at the current sales rate jumped to a record 12.9 months’ worth. That is more than twice as much as the five-to-six months supply that the National Association of Realtors has said is consistent with a stable market. The housing report showed builders were unable to trim inventories as fast as sales dropped. The number of homes for sale fell 10 percent to a seasonally adjusted 357,000, the fewest since Sept. 2003. Sales of new houses dropped in all four regions, led by a 28 percent decrease in the Northeast and a 20 percent slump in the West. New-home purchases, which now account for less than 10 percent of the market, are a timelier indicator than existing sales because they are based on contract signings. Sales of previously owned homes, which make up the rest, are compiled from closings and reflect contracts signed weeks or months earlier. Getting ‘Clocked’ “The new-home market is getting disproportionately clocked relative to the existing-home market,” Stephen Stanley, chief economist at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut, said before the report. “New home sales have taken the bulk of the hit.” Sales of existing homes in December unexpectedly rose 6.5 percent, the National Association of Realtors said Jan. 26. For the full year 2008, existing home sales fell 13 percent. Declining residential construction has detracted from economic growth since early 2006. Home prices have fallen by a quarter on average since mid- 2006, according to the S&P/Case-Shiller 20-city price index, partly reflecting an 81 percent surge in foreclosures last year. Mounting delinquencies touched off a wave of defaults on mortgage-backed securities, infecting the global financial system and leading to bank losses that may reach $2.2 trillion, according to the International Monetary Fund. That’s created a spiral of tighter credit, slumping spending and falling prices. ‘Tight’ Credit “Credit conditions for households and firms remain extremely tight,” the Federal Reserve said yesterday in its latest policy statement after it kept its lending rate as low as zero. The central bank said it was ready to purchase Treasuries to revive lending and would continue to purchase government- agency and mortgage-backed debt “to provide support to the mortgage and housing markets.” The shrinking real-estate market is costing more and more jobs, from banks and homebuilders to manufacturers and retailers. Caterpillar Inc., the world’s largest maker of bulldozers and excavators, this week said it’s cutting 20,000 jobs and this year’s profit and sales will trail analysts’ estimates. Home Depot Inc., the world’s largest home-improvement retailer, will cut 7,000 jobs, or 2 percent of its workforce, and exit its design showroom business, the company said. To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net Last Updated: January 29, 2009 10:38 EST Share this post Link to post Share on other sites
