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Sales of new homes record fall in 9 yrs { February 2006 } Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000006&sid=aVUY04AHaf18&refer=homehttp://quote.bloomberg.com/apps/news?pid=10000006&sid=aVUY04AHaf18&refer=home
U.S. Economy: Sales of New Homes Fall by Most in Nine Years
March 24 (Bloomberg) -- Sales of new U.S. homes slumped by the most in nine years and demand for business equipment declined last month, prompting some economists to lower their forecasts for economic growth.
Home purchases fell 10.5 percent to an annual rate of 1.08 million, causing prices to fall and leaving more houses on the market, the Commerce Department said in Washington. Orders for durable goods excluding transportation equipment, fell 1.3 percent, the most since July, the department also said.
``Consumers are a little more cautious,'' J. Larry Sorsby, chief financial officer of Hovnanian Enterprises Inc., New Jersey's largest homebuilder, said in an interview. ``You can't open a newspaper these days without seeing someone saying the housing market is softening.''
A decline in inventories and sales of durable goods caused economists at Morgan Stanley to mark down their first-quarter growth estimate to 4.2 percent from 4.6 percent. U.S. Treasury securities rose on speculation less business investment and slower home sales will limit the number of Federal Reserve interest-rate increases.
The benchmark 10-year Treasury note rose 11/32, pushing down the yield 5 basis points to 4.69 percent, at 10:45 a.m. in New York. A Standard & Poor's index of 16 homebuilders, including D.R. Horton Inc. and Lennar Corp, fell 0.7 percent.
February's decline in home sales was the biggest since April 1997. Economists expected new home sales to fall to a 1.2 million rate from January's originally reported 1.233 million, according to the median of 61 forecasts in a Bloomberg News survey. Estimates ranged from 1.17 million to 1.275 million.
Leading Indicator
The report comes a day after the National Association of Realtors said sales of previously owned homes rose 5.2 percent last month to an annual rate of 6.91 million. Purchases of new homes are considered a leading indicator of housing because they are based on contract signings, which typically occur at least a month before the closing. The rise in February sales of existing homes may have reflected purchase decisions made in January, when record-warm temperatures brought out buyers.
The median selling price of a new home last month fell 2.9 percent from February 2005, to $230,400, the first decrease since December 2003 and the biggest year-over-year decline since January 2003.
Rising mortgage rates are making new homes less affordable. The average rate on a 30-year mortgage rose to 6.25 percent in February from 6.15 percent the month before, according to Freddie Mac.
Sales fell in two of four regions. They declined 29 percent in the West and 6.4 percent in the South. Sales rose 12.7 percent in the Northeast and 5.2 percent in the Midwest.
Durable Goods
Orders for durable goods excluding transportation equipment fell after rising 1.6 percent a month earlier. A jump in demand for commercial aircraft led to a 2.6 percent increase in orders for all durable goods after an 8.9 percent decrease.
Economists projected durable goods orders would rise 1.3 percent in February, based on the median of 70 estimates in a Bloomberg News survey. Orders excluding transportation equipment were forecast to rise 1 percent.
Orders for transportation equipment rose 13 percent after falling 29 percent in January. Aircraft orders jumped 53 percent after falling 70 percent in the previous month. Bookings for motor vehicles fell 3.3 percent.
Boeing's Role
Chicago-based Boeing Co., the world's second-biggest maker of commercial airplanes, said it received 25 aircraft orders in February, down from the 39 in the previous month. Boeing's orders more than tripled to a record 1,002 last year on demand from Asian and Middle Eastern carriers.
Production cuts by some automakers may have restrained durable goods orders in February. Cars and light trucks sold at a seasonally adjusted annual rate of 16.6 million during the month, down from 17.6 million in January.
General Motors Corp. and Ford Motor Co., the two biggest U.S. automakers, on March 1 said they will cut second-quarter production in North America after reporting U.S. sales declines in February.
Sales of non-defense capital goods excluding aircraft, which the government uses to construct quarterly gross domestic product figures, fell 1.1 percent in February after no change. Orders for non-defense capital goods excluding aircraft, a proxy for future business investment, fell 2.3 percent last month after rising 0.3 percent.
Unfilled orders of business equipment rose 0.5 percent in February after no change.
Inventories of durable goods fell 0.5 percent after rising 1 percent in January. Unfilled orders, a gauge of future production, rose 0.9 percent after falling 0.2 percent.
Last Updated: March 24, 2006 11:17 EST
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