New Home Sales Are In The Basement
Thursday, April 24, 2008SUSIE GHARIB: New home sales plunged in March to their lowest level in nearly 17 years. The Commerce Department said today that sales fell 8.5 percent last month to a seasonally adjusted rate of 526,000 units. Economists were expecting a drop of less than 2 percent. February's sales numbers were revised lower. Aggressive price cuts from builders also showed up in the report. The median price for a new home dropped over 13 percent to $227,000. The news comes as the National Association of Homebuilders held its annual housing outlook conference in Washington, DC. As Stephanie Dhue reports, the trade group says the housing contraction isn't over.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: With an 11 month supply of new homes on the market, the outlook for housing has darkened. Home builders economist David Seiders says he now expects the housing drag to put the U.S. into a mild recession this year and he notes March's weak home sales support that view.
DAVID SEIDERS, CHIEF ECONOMIST, NATIONAL ASSOCIATION OF HOME BUILDERS: These moves are so large, there's no doubt that the new home market is still deteriorating, at least through March in terms of sales activity. That's really bad news because, as I said, the first thing that has to happen to turn this housing cycle around is for demand to revive to some degree.
DHUE: JPMorgan Chase economist Jim Glassman says the U.S. financial sector may be two thirds of the way through heavy losses and huge write-downs. But what happens now in the housing market is key.
JAMES GLASSMAN, SR. ECONOMIST, JP MORGAN CHASE: The elephant in the room is this picture right here, what's going on with house prices. That is the driver for a lot of this stress.
DHUE: Most economists predict home prices will continue to fall this year and into 2009. Fannie Mae economist Doug Duncan says house prices typically keep falling until sales and construction activity pick up. By looking at past downturns, he predicts this housing downturn may be nearing an end.
DOUG DUNCAN, CHIEF ECONOMIST, FANNIE MAE: You do see at the bottom or very near the bottom a significant financial firm failure and to the extent you want to characterize the Bear Stearns event as that, that may be a signal that the roughest part of the downturn in the credit markets is passing.
DHUE: Policy prescriptions, like lower interest rates, the fiscal stimulus checks and foreclosure prevention plans should help the housing market find its footing. Still, economist Mark Zandi says it will be next spring before it reaches bottom.
MARK ZANDI, CHIEF ECONOMIST, MOODY'S ECONOMY.COM: The only thing is time. Prices have to come down, builders have to cut construction. That'll ultimately cut into the amount of inventory that is out there and ultimately we will find a bottom.
DHUE: Lawmakers may do more to keep foreclosures from rising and home prices from spiraling downward. Today, the House Financial Services Committee outlined a proposal that would have the government buy billions of dollars in troubled mortgages. But that proposal has a long way to go to become law. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
