Home sales decline by 3.9%
The Commerce Department reported Monday that sales of single-family homes dropped 3.9 percent last month to a seasonally adjusted annual rate of 848,000 units, the slowest pace in nearly seven years.
The decline followed a 15.8 percent plunge in January, the biggest one-month decline in 13 years.
The weakness in sales was accompanied by a drop in prices, with the median price of a new home falling to $250,000 in February, down 0.3 percent from a year ago.
The report was far weaker than Wall Street had been expecting and raised concerns that rising mortgage delinquencies and foreclosures, especially in the subprime market, would further depress housing activity in the months ahead as nervous lenders tighten their standards.
The Dow Jones industrial average fell 11.94 points Monday to close at 12,469.07 as investors reacted to the disappointing home sales report.
Concerns about financial difficulties facing many lenders in the subprime market, designed for borrowers with weak credit ratings, contributed to a 416-point plunge in the Dow average on Feb. 27.
Sales were down in every region of the country except the West.
In addition, the government revised sales information for the previous three months to show weaker activity than previously reported.
The number of unsold homes shot up to 546,000 units. It would take 8.1 months to eliminate that backlog of unsold homes at the February sales pace, the longest period for this measurement in 16 years.
Economists predicted further downward pressure on prices in the months ahead until the number of unsold homes is lowered to more normal levels.
Patrick Newport, senior economist at Global Insight, said he expected that housing, which has been a major factor reducing overall economic growth, will probably trim growth rates by about 1 percentage point for all of 2007.
"The housing market is weak," he said. "Our view is that housing will not turn around until next year."
By region of the country, sales were up 24.6 percent in the West, a rebound after a 25.8 percent plunge in January.
Sales fell by 26.8 percent in the Northeast and were down 20 percent in the Midwest, two areas that were hit by snowstorms last month. Sales were down 7 percent in the South.
On the Net:
New home sales: www.census.gov/newhomesales
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