WASHINGTON (AP) _ Sales of new homes plunged in March to the slowest pace in 16½ years as a two-year housing downturn extended into the start of another spring sales season. The median price of a new home in March compared to a year ago fell at the fastest clip in 38 years.
Sales of new homes dropped by 8.5 percent last month to a seasonally adjusted annual rate of 526,000 units, the slowest sales pace since October 1991, the Commerce Department reported Thursday.
The median price of a home sold in March dropped by 13.3 percent compared with March 2007, the biggest year-over-year price decline since a 14.6 percent plunge in July 1970.
Housing, which boomed for five years, has been in a prolonged slump for the past two years with sales and home prices falling at especially sharp rates in formerly hot sales areas.
Some analysts said they believe the slide in sales may be close to ending although they said any rebound is likely to be slow and anemic with prices continuing to fall, possibly until this time next year.
Earlier this week, the National Association of Realtors reported that sales of existing homes also fell in March, dropping by 2 percent, with prices declining on a year-over-year basis by 7.7 percent.
"The start of the spring home buying season is turning out to be a bust," said Stuart Hoffman, chief economist at PNC Bank Corp. in Pittsburgh. "It is much better to be a buyer than a seller right now."
Hoffman said he thought sales would stabilize by this fall but that prices could keep falling until the start of the 2009 spring sales season. Prices are being depressed by the continued huge inventory of unsold homes, a backlog that reflects rising numbers of mortgage defaults which are dumping more homes on an already glutted market.
On Wall Street, stocks rallied Thursday as investors were cheered by first-quarter results from Fort Motor Co. and a sizable decline in weekly applications for unemployment benefits. The Dow Jones industrial average rose 85.73 points to close at 12,848.95.
For March, new home sales were down in all regions of the country, dropping the most in the Northeast, a decline of 19.4 percent. Sales fell by 12.9 percent in the West, 12.5 percent in the Midwest and 4.6 percent in the South.
The overall drop was much bigger than expected and the size of the declines in many regions of the country also took economists by surprise.
"Every region shared in the carnage," said Joel Naroff, chief economist at Naroff Economic Advisors. "These are not soft numbers. They are Depression numbers."
Still, economists said they believed that the extent of the downturn may be signaling that at least in terms of sales, things could bottom out by this summer or by the latest, this fall, as falling prices lure buyers back into the market.
"Sellers continue to aggressively price and market new homes," said Patrick Newport, an economist with Global Insight. "Provided that financial markets stabilize, we still expect their efforts to pay off with new home sales turning in the second half of this year."
Economic growth slowed to a near-standstill at the end of last year as the economy was battered by the prolonged slump in housing and a severe credit crunch that has resulted in billions of dollars of losses at many of the nation's largest financial institutions. Many economists believe the country has fallen into a full-blown recession although President Bush earlier this week disagreed, saying the country was in a slowdown but not a recession.
Consumer sentiment has plunged to recessionary lows as Americans have watched gasoline soar to an average price above $3.50 per gallon nationally.
In other economic news, orders to factories for big-ticket manufactured goods fell for a third straight month in March, the longest string of declines since the 2001 recession, while applications for unemployment benefits fell by 33,000 to 342,000.
The Commerce Department said demand for durable goods dropped by 0.3 percent last month, a worse-than-expected performance that underscored the problems manufacturers are facing from a severe economic slowdown. The last time orders fell for three consecutive months was from February to April of 2001, when the country was sliding into the last recession.
The weakness in manufacturing orders was led by a 4.6 percent drop in orders for autos, a sector hard hit by soaring gasoline prices, and the weakening economy, which have cut sharply into car sales. Orders in the category that includes home appliances fell by 6.6 percent. This industry has been hurt by the two-year slump in home sales.
The Labor Department reported that claims for unemployment benefits fell by 33,000 last week to 342,000. Economists had been expecting claims to rise by 3,000, but even with the improvement analysts said the weak economy is still putting greater pressures on the labor market and unemployment, now at 5.1 percent, is likely to rise further.
Copyright 2008 The Associated Press.