Sagging Home Sales, GDP Highlight Dour Economic Reports
The Commerce Department reported that the gross domestic
product, the broadest measure of economic health, declined at an annual rate of
0.5 percent in the July-September quarter, while corporate profits fell 1.2
Analysts forecast that those small declines will be followed
by much larger decreases this quarter as the longest recession in a quarter
century gains intensity.
The 1.2 percent fall in corporate profits followed a 3.8
percent drop in the spring and represented the fifth straight quarter that corporate
profits have fallen.
Meanwhile, the Reuters/University of Michigan Surveys of
Consumers said its final index reading of consumer confidence for December rose
to 60.1 from November’s 55.3.
U.S. consumer confidence rose in December, although job losses
and falling income continued to weigh on sentiment, a survey showed Tuesday.
December’s final reading was the highest since 70.3 in September, and was also
above the preliminary index reading, released on December 12, which was 59.1.
But the latest home-sales data were less encouraging as
sales of new and existing homes continued to fall last month.
New home sales fell to the slowest pace in nearly 18 years,
while prices dropped by the biggest amount in eight months. The Commerce
Department reported that new home sales fell 2.9 percent to a seasonally
adjusted annual sales pace of 407,000 units.
That was a weaker performance than economists had expected
and was the slowest sales pace since January 1991.
The median price of a new home sold in November was
$220,400, a drop of 11.5 percent from the sales price a year ago. That was the
biggest year-over-year price decline since a 12.7 percent fall in March of this
year. The median is the point where half the homes sold for more and half for
The sales weakness in November reflected a 16.4 percent drop
in the Midwest and a 7.1 percent fall in the South. Sales were up 14.3 percent
in the Northeast and 11 percent in the West.
The inventory of unsold new homes stood at 374,000, down 7
percent from the October inventory level. It would take 11.5 months to exhaust
the current supply of new homes at the November sales pace. That inventory
bulge is still seen as too high, given that many houses are being dumped onto
an already glutted market by a tide of foreclosures.
Many analysts believe the housing slump will last well into
next year, given the difficult sales environment.
The pace of existing home sales plunged a record 8.6 percent
in November and prices fell a record amount as layoffs and a stock market crash
worsened an already grim housing market, a real estate trade group said.
The median home price fell 13.2 percent on an annual basis,
down for a fifth straight month to $181,300. It was the largest drop since the
current data series began in 1968 and probably the largest since the Great
Depression, said Lawrence Yun, the chief economist for the National Association
of Realtors, according to Reuters.
Analysts believe that GDP, the economy’s total output of
goods and services, is falling at an even sharper pace in the current quarter,
reflecting the fallout from the worst financial crisis to hit the country since
the Great Depression.
Some believe the GDP plunge could be as large as 6 percent
in the current October-December quarter, which would make it the largest
decline since a 6.4 percent drop in the first quarter of 1982.
Many economists say this quarter could mark the low point of
the recession, which is already the longest in a quarter century, having
started in December 2007.
They are forecasting smaller GDP declines in the first and
second quarter of next year before the economy starts growing again next
summer. If the recession ends in June, as many economists are forecasting, it
would have lasted 18 months, making it the longest recession in the post-World
War II period.
President-elect Barack Obama favors a massive second
government stimulus measure of around $850 billion, which he is pushing
Congress to pass early next year to limit the severity of the downturn.