Reports Shows U.S. Housing Market May Be Cooling Off
This decline follows a 10.8% plunge in January, and marks the first back-to-back fall in new-home sales since activity fell for three straight months from July through September of 1999.
That was when the Federal Reserve was raising U.S. interest rates, which tends to dampen home purchases. This time around, the Fed has been cutting rates, but home sales are falling anyway as layoffs spread among corporations.
A sustained reduction in sales of new homes likely means that fewer homes will be built in coming months. A contraction in housing construction means a decline in freight traffic for trucking companies of both raw materials to build them and finished goods to fill them.
Also Monday, the National Association of Realtors said sales of previously owned homes edged down 0.4% last month to a seasonally adjusted annual rate of 5.18 million homes.
Sales of existing homes can also affect the home furnishings market, and can influence demand for new houses as well.
While declining consumer confidence could undermine housing in the coming months, low mortgage rates are helping to keep housing sales relatively strong. Mortgage rates have fallen nearly 2 percentage points in the past year, largely in anticipation of the Federal Reserve's easing.
However, economists caution not to read too much into February's housing numbers because sales data can be erratic during the winter when weather can play a big role in buyers' traffic and construction completions.
New home sales rose about 20% in the Northeast and fell about 19% in the Midwest, an indication of just how volatile the figures can be. Sales were also flat in the South and West.
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