Sales of new homes fell to record low in January

AP Economics Writer
WASHINGTON (AP) - Sales of new homes plunged to a record low in
January, underscoring the formidable challenges facing the housing
industry as it tries to recover from the worst slump in decades.
The Commerce Department reported Wednesday that new home sales
dropped 11.2 percent last month to a seasonally adjusted annual
sales pace of 309,000 units, the lowest level on records going back
nearly a half century. The big drop was a surprise to economists
who had expected sales would rise about 5 percent over December's
While winter storms were partly to blame, home sales have fallen
for three straight months despite sweeping government support.
Economists were already worried that an improvement in sales in the
second half of last year could falter as various government support
programs are withdrawn.
January's weakness was evident in all regions except the
Midwest, where sales posted a 2.1 percent increase. Sales were down
35 percent in the Northeast, 12 percent in the West and almost 10
percent in the South.
The drop in sales pushed the median sales price down to
$203.500. That was down 5.6 percent from December's median sales
price of $215,600, and off 2.4 percent from year-ago prices.
New home sales for all of 2009 had fallen by almost 23 percent
to 374,000, the worst year on record. The National Association of
Home Builders is forecasting that sales will rise to more than
500,000 sales this year, an improvement from 2009 but still far
below the boom years of 2003 through 2006 when builders clocked
more than 1 million new home sales per year.
January's data will increase concerns that the housing rebound
could falter in coming months as the government withdraws the
support it has used to try to bolster the housing market, which
stood at the epicenter of the country's overall recession, the
worst downturn since the 1930s.
A $1.25 trillion program from the Federal Reserve which has held
down mortgage rates is set to end March 31 and tax credits to
bolster home buying are scheduled to expire at the end of April.
First-time home buyers could qualify for a credit of up to
$8,000 while homeowners who have lived in their current properties
for at least five years could claim a tax credit of up to $6,500 if
they decided to move into another home.
Though the overall economy started growing again this past
summer, economists are worried because unemployment remains high.
This weakness is causing consumers to shy away from spending,
especially on big-ticket items such as homes.
The Conference Board reported Tuesday that its Consumer
Confidence Index fell almost 11 points to 46 in February, pushing
the index down to its lowest reading since last April. At 46, the
index is a long way from the 90 reading that economists generally
view as depicting healthy consumer attitudes.

(Copyright 2010 by The Associated Press. All Rights Reserved.)

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