Prices of New Homes Fall for the Fourth Month in a Row

Posted on May 6th, 2008 by saman

The sales of new homes in the U.S. dropped in the month of February for the fourth month in a row. This has pushed the activity of selling homes down to a thirteen year low.The one percent drop in the yearly sales rate had dropped to about five hundred thousand units during the month of February. This is the slowest rate of home sales since 1995, and has dropped almost sixty percent from July 2005.The average price of homes for sale last month fell to two hundred and forty four thousand dollars. This is two percent less than last year. A housing index reported that sixteen out of twenty cities have reported record yearly price declines since January of last year. Another report showed that the sale of homes have increased by about three percent in the month of February. This is the first increase after sales had declined for six months. Even so, analysts do not expect a long lasting rebound for several months because the amount of unsold homes is very high. Home builders have halted construction on new homes and have offered large discounts. These efforts have been canceled out by the large number of defaults. The defaults have placed more homes on the market. Analysts say that the demand for houses is weak heading into spring. One of the reasons for this is that getting home loans is more difficult because of tighter lending standards, and the fact that potential home buyers are hesitant to buy a home where the prices of houses are falling. New home sales in the Northeast have dropped by forty percent and in the Midwest have fallen by six percent. Home sales climbed in the South by about six percent in the South. An economist from the national home builders association has said that have seen more people going through their model homes, but that hasn’t translated into higher sales. He believes that house sales will bottom out in the spring. He says this rebound might slow down however.

Many are worried that the poor economy and the climb in unemployment will make it harder for housing to make a solid rebound during the second part of 2008. The president has said that the bad economy will become stronger with the assistance of the recent one hundred and sixty eight billion dollar “rescue” plan and rebates. The president says that he understands the public concern about the economy but encourages patience by saying the package has not completely kicked in yet.

Another report has said that manufacturing is under a lot of stress due to the mortgage and economic problems. Orders for big ticket items fell by almost two percent. The demand for commercial aircraft came back strong, orders for cars have fallen, and the orders for machinery dropped by the largest amount recorded.

The decline in business investments reflect the many problems the economy is facing, including tighter credit standards, economic uncertainty and the increasing cost of raw materials and energy.