Sales of new homes rebound in September
October 25, 2007
WASHINGTON (AP) ” Sales of new homes posted an unexpected gain in September although the improvement came after sales had fallen to the slowest pace in more than a decade.
The Commerce Department reported Thursday that sales of new homes rose by 4.8 percent last month to a seasonally adjusted annual rate of 770,000 units. That level of activity was still 23.3 percent below a year ago, indicating that housing remains in a steep downturn.
Analysts had been expecting sales would fall by 2.5 percent last month from an August sales pace that had originally been reported as 795,000 homes. However, that figure was revised sharply lower in the new report to show a sales rate of just 735,000 in August, the slowest sales pace in 11 years.
Meanwhile, orders for big-ticket manufactured goods dropped an unexpected 1.7 percent last month following an even bigger 5.3 percent plunge in August. The first back-to-back declines in factory orders in more than a year raised new worries about how much harm would be inflicted on the economy from a severe housing slump and credit crunch.
In a third report, the Labor Department said that the number of newly laid off workers filing claims for unemployment benefits fell by 8,000 last week to 331,000.
The report on home sales showed that the median new home price in September ” the point where half the homes sold for more and half for less ” rose to $238,000, up 2.5 percent from August, which had seen prices fall to the lowest level in nearly a year.
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The rebound in home sales was led by a 37.7 percent surge in the West. Sales were also up 0.5 percent in the South. But sales of new homes fell by 19.5 percent in the Midwest and 6.6 percent in the Northeast.
The September drop in orders for durable goods reflected weakness in such areas as autos, fabricated metals, computers and electronics products, and electrical appliances.
That decline followed several other reports showing economic weakness, including continued steep slides in sales of existing homes and reports from banks and investment houses that they were having to take big write-offs due to losses in such areas as mortgage-backed securities.
Losses that began in investments on subprime mortgages, where deliquency rates are soaring, had caused a severe credit crunch in August as the market for many kinds of investments nearly dried up.
The concern is that if the economic disruptions become serious enough, they could drag down overall economic growth, which has already slowed under the impact of the steep downturn in housing.
Many analysts, however, believe the economy will still be able to avoid an outright recession because the Federal Reserve, which cut a key interest rate for the first time in four years, will keep cutting rates to stimulate economic growth. The Fed meets again next week.
In a new report released Thursday, the congressional Joint Economic Committee estimated that 2 million subprime mortgages could go into foreclosure over the next 18 months as initially low introductory rates reset at much higher levels. The JEC report said that states will lose $917 million in property tax revenue as housing values are depressed by the wave of foreclosures.
“State by state, the economic costs from the subprime debacle are shockingly high,” Sen. Charles Schumer, chairman of the JEC said in a statement. “From New York to California, we are headed for billions in lost wealth, property values and tax revenues.”
Schumer called on the Bush administration to more more aggressively to help families find ways to avoid going into default on their home loans.
The report on durable goods showed that orders for transportation equipment fell by 6.3 percent last month after an even bigger 12.3 percent fall in August.
Demand for commercial aircraft did rebound, rising by 18.2 percent in September after a 40.2 percent plunge in August as demand picked up at aircraft-maker Boeing Co.
But orders for autos fell by 2.9 percent after an even bigger 8.2 percent drop in August, reflecting the continuing troubles for domestic automakers struggling with foreign competition and consumers’ shift away from gas-guzzling vehicles.
Orders for military aircraft were also down a sharp 37.3 percent in September after having surged in August.
Excluding transportation, orders for durable goods would have risen by 0.3 percent following a 1.8 percent drop in orders outside of transportation in August.
Copyright 2007 The Associated Press.