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Click Here Click Here AP New Home Sales Down by Most in 9 Years Friday March 24, 1:19 pm ET By Martin Crutsinger, AP Economics Writer New Home Sales Plummet in February by Largest Amount in Nearly Nine Years WASHINGTON (AP) -- Sales of new homes plunged by the largest amount in nearly nine years in February while the median price of a new home dropped for the fourth straight month, providing fresh evidence that the nation's once-booming housing market is cooling off.
It was the second straight monthly decline and was much bigger than the small 2 percent dip that Wall Street was expecting. The drop in new home sales followed news Thursday that sales of previously owned homes actually rose by a stronger-than-expected 52 percent last month following five straight monthly declines. Analysts said the trend in both reports pointed to a slowing housing market after five record-setting years. The median price of a new home sold last month dropped to $230,400, down by 16 percent from January and off 29 percent from February 2005. The median is the mid-point where half the homes sold for more and half for less. In other economic news, orders to US factories for big-ticket manufactured goods rose by 26 percent last month, the biggest gain since November, reflected a surge in demand for commercial aircraft. Outside of the volatile transportation sector, orders actually fell by 13 percent, but economists said the underlying trend for manufacturing remained strong. Sales of new homes have fallen in four of the past five months with the sales rate of 108 million units the slowest pace since May 2003. While sales of both new and existing homes climbed to new all-time highs in 2005, the fifth consecutive annual records, analysts believe sales will decline this year as the housing boom slows under the impact of rising mortgage rates. The slowdown in sales pushed the inventory of unsold homes up to a record of 548,000 at the end of February. At the February sales pace it would take 63 months to sell all of the homes on the market, up from 53 months in January. Analysts believe that the growing backlog of unsold homes will start to put more pressure on home sellers to reduce prices in the months ahead. Economists still believe that housing is likely to see a moderate slowdown this year rather than anything as severe as the bursting of the speculative bubble in stock prices at the beginning of this decade. That decline was severe enough, wiping out trillions of dollars in wealth, that it helped pushed the economy into a recession. Excluding transportation, orders fell by 13 percent last month, the weakest showing in this category since last July. But analysts noted that this drop followed strong gains in the non-transportation area in the previous two months, a good signal for future growth. "The bottom line here is that industry is doing well," said Ian Shepherdson, chief US economist for High Frequency Economics. Orders for motor vehicles dropped by 33 percent in February after a 32 percent decline in January. American automakers have been struggling with increased foreign competition and sagging demand for sport utility vehicles in the face of rising gasoline prices. earlier this week announced one of the largest buyouts in corporate history in an effort to cut costs by trimming payrolls. The 26 percent increase in overall orders was the biggest gain since a 53 percent rise last November.
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