The worst days of the housing slump may lie ahead. Buyers vanished from the housing market in March, as sales of new homes plummeted to the lowest level since the housing recession of the 1990s, the Commerce Department said on Thursday.þþBuilders are faced with the biggest backlog of unsold homes in more than a quarter-century, a sign that house prices may continue to drop. þþ“People are obviously reluctant to buy so long as prices continue to fall,” said Bernard Baumohl, managing director of the Economic Outlook Group. “They have no desire to buy a house that is going to be worth less two months later.”þþEven those who want to buy may be stymied, Mr. Baumohl added, as lenders tighten their credit standards amid broad financial trouble.þþSales of new homes fell 8.5 percent, a sharper decline than economists had forecast. The drop-off may be related to the downturn in the job market; employers cut 80,000 jobs in March, the most so far this year. þþ“That has a very profound psychological impact on people,” Mr. Baumohl said. “They are not likely to make a major investment if they are uncertain about job security and income growth.” þþHome sales are running at an annual pace of 526,000, after adjusting for seasonal factors, the lowest since October 1991. At the current sales pace, it will take 11 months for builders to work off the backlog, the biggest inventory pileup since 1981.þþJoseph Brusuelas, an economist at IdeaGlobal, wrote in a note to clients that “the housing sector will continue to act as dead weight on overall growth throughout the remainder of 2008.” þþSales dropped in every region of the country, with the Northeast having the steepest drop, 19.4 percent. Sales in the Midwest and the West fell about 13 percent, and 5 percent in the South.þþAdding to the gloom, the Commerce Department lowered its estimate for February sales, to a drop of 5.3 percent from a drop of 1.8 percent. Prices continued to fall as well, which could discourage some prospective buyers from re-entering the market. The median price of a new home dropped in March to $227,600, down 13.3 percent from a year earlier. þþThe housing slump has weighed heavily on manufacturing, as Americans shy away from large purchases. The Commerce Department said Thursday that manufacturing orders fell in March, the third consecutive monthly decline. þþOrders for durable goods dipped 0.3 percent, to a seasonally adjusted $212.2 billion, down $700 million from February.þþAlthough some economists had expected a small rise in durable goods orders, the report was considered relatively mild after the results of recent months. þþRob Carnell, an economist at ING Bank in London, said the data could lend support to the optimistic camp of analysts who maintain that the nation will avoid a prolonged recession.þþSeparately Thursday, the Labor Department said the number of workers filing initial claims for unemployment benefits fell by 33,000 last week, to 342,000. The four-week moving average, which tends to smooth out weekly volatility, fell by 7,250 claims, to 369,500.þþ
Source: NY Times
