Thursday April 24, 08:27 PM
US March new home sales fall to more than 16-year low
By Veronica Smith
WASHINGTON (AFP) - Sales of new US homes plunged to their lowest level in over 16 years in March despite hefty price declines in response to a glut of unsold homes, Commerce Department data showed Thursday.
The grim monthly report follows a key industry survey this week showing sales of existing homes, the largest sector of the market, slid further in March, deepening the worst housing sector slump in decades.
Most analysts say the market has not yet reached bottom after the collapse of a boom market two years ago that has weakened the economy and cost banks billions of dollars in mortgage-related losses.
The Commerce Department reported March new home sales fell 8.5 percent to a seasonally adjusted annual pace of 526,000 units, well below analysts' consensus forecast for a rate of 580,000.
The March sales pace was the weakest since October 1991 and 36.6 percent below the March 2007 estimate of 830,000.
Sale prices marked double-digit declines. The median price was down 13.3 percent year-over-year at 227,600 dollars, the largest 12-month decline since 1970. The average price was 292,200 dollars, down 11.3 percent over the last year, a new record 12-month decline.
"It (Frankfurt: A0MLX5 - news) appears that the rumors of housing finding a bottom may just be that," said Joel Naroff of Naroff Economic Advisors, calling the data "depression numbers."
Builders cut 1.1 percent off the actual number of unsold homes to 468,000, but with the slowing sales rate they were left with an 11-month supply, the largest inventory overhang since an 11.3-month supply in September 1981.
Marie-Pierre Ripert, analyst at Natixis (Paris: FR0000120685 - news) , noted the "significant" supply glut, "suggesting that the downward adjustment will continue in the months ahead."
The Commerce report nipped a modest opening rally on Wall Street as equities investors feared that housing woes could be deepening.
"This isn't a good report on any front, so it isn't surprising that the stock market suffered a dip in its wake," Briefing.com analysts wrote in a client note.
Commerce also revised January and February sales down by a net 9,000 units. The department initially reported a 590,000 annual rate of sales in February, but reduced that to 575,000.
Plummeting new home sales in March affected homes all regions of the country. The Northeast was hardest hit, with sales plummeting 19.4 percent to their lowest level since 1981. Sales in the Northeast have fallen a record 64.6 percent over the last 12 months.
Sales fell 12.9 percent in the West and 12.5 percent in the Midwest, pushing sales down to levels not seen since 1991. In the South, sales dropped 4.6 percent to their lowest level since 1996.
The government data followed a similarly bleak report Tuesday by the National Association of Realtors showing sales of existing US homes fell two percent in March from February and 19.3 percent from a year ago.
The US Federal Reserve has slashed three percentage points off its key interest rate since September in a bid to restore momentum to gross domestic product (GDP) growth amid the housing slump and a related credit squeeze.
The Fed is widely expected to lower its federal funds rate, currently pegged at 2.25 percent, by a quarter point at its April 29-30 meeting.
A growing number of economists believe the world's biggest economy has fallen into recession after growing an anemic 0.6 percent in the final quarter of 2007.
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