New Home Sales Continue to Fall
MADELEINE BRAND, host:
From NPR News, this is DAY TO DAY.
Sales of new homes dropped again last month. It's the lowest rate in nearly seven years. And in response, today on Wall Street, stocks fell.
MARKETPLACE's Janet Babin is here now.
And Janet, it looks like investors are really worried about the housing market.
JANET BABIN: Well, it does. Volume - as you said Madeleine - the number of new homes sold in February was the lowest it's been since June of 2000. We saw about a 4 percent decline from January. And apparently, what's scaring investors is that this drop came as a bit of a surprise to analysts.
You know, everyone had expected February new home sales to jump, and that's because housing starts were up in February and so were sales of existing homes. So it would logically follow that new home sales would be up, too.
BRAND: Well, why do economists think that they didn't go up, they dropped?
BABIN: Well, when in doubt, Madeleine, blame it on the seasons. Economists say it's winter, and in winter, housing statistics can do weird things. I mean, think of February in much of the country - not where you guys are - but Boston, Chicago, Cleveland, Detroit - very cold, gloomy and snowy.
You're going to need a lot of motivation to want to move in the winter. So there tend to be strange blimps - blips, rather - in winter housing numbers. But, you know, even if the numbers are an anomaly, there's clearly no doubt that the housing market remains weak. Sales are down 18 percent from last year.
BRAND: Well, so what does it mean for people who are not in the business, who are not homebuilders?
BABIN: Right. Well, it's a good time, obviously, to be buying a home. Not such a great time to be selling one. And as to whether this is affecting the entire economy, there are mixed views out about that.
I spoke today with economist David Wyss over at Standard & Poor's, and he says obviously the housing market is experiencing a down turn, but he really thinks that the broader economy will manage to escape serious recession here.
Mr. DAVID WYSS (Standard & Poor's): You're seeing some impact on the rest of the economy. But yeah, I think by and large the damage here is largely confined to the housing market. And (unintelligible) in some related industry like, you know, furniture and appliances.
BABIN: And that said - as you said, Madeline - U.S. stocks did fall sharply today after these numbers were released.
BRAND: And do analysts have a date or time when they see the housing market recovering?
BABIN: Well, when the initial February numbers for existing homes and housing starts were up, economists had hoped, you know, that we'd seen the bottom of the market and we're going to start crawling our way up. But with this new housing sales figure today, if it is more than just a winter blip, it looks like the bottom of the market could be a ways off.
Wyss says he doesn't expect a recovery until the end of this year, maybe next year. Now, that could change if the Federal Reserve were to lower interest rates.
BRAND: Thank you, Janet. That's Janet Babin of public radio's daily business show MARKETPLACE, produced by American Public Media.
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