New home sales plunged to a record low in February, falling 16.9% to a seasonally adjusted annual rate of 250,000 units, far south of the rate of 290,000 units forecast according to a survey issued by Bloomberg. Based on the current sales pace, it would take 8.9 months to clear the market of new homes, up from 7.4 months in January.
The weakness in new housing sales follows a plunge in building permits and starts for single-family homes last month, signaling that home builders remain unconvinced a rebound in the market is at hand.
Many of the themes that have pounded the market are still in place, including tight credit standards, high unemployment and a shadow inventory of foreclosures that continues to haunt builders.
In addition, many potential buyers remain on the fence, unconvinced that prices have bottomed, even as mortgage rates hold at attractive levels.
The nasty weather much of the country experienced in January and February may have played a role in February's dismal showing, and that may help to propel a modest rebound in March and April, though the plunge in single-family building permits last month is unsettling.
Nonetheless, builders will likely struggle for much of the year given the many factors that are hindering sales.
For more information about current issues impacting the economy, please see Tomorrow's Economy Today. Despite weakness in housing, the industry is losing its importance as a driver of economic activity.
Other articles of interest include a look at how wind and solar power would do little to reduce U.S. dependence on foreign sources.
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