New-home sales tumbled by 11 percent in January, generating heightened anxiety for the construction and housing markets. Reports from the Commerce Department released Wednesday indicate that new-home sales are at their worst levels in 50 years, down to just 309,000 for the first months of the year. Economist predictions for the month had been for a 5 percent decline from December. The disparity between the estimate and the reality has contributed to the mounting concern surrounding the market’s frailty.
The continued decline of the housing market leads investors to question the stability and speed of the U.S. economic recovery. Last year, new-home sales fell 23 percent from 2007 to 374,000 for 2009. In the years prior to the drop, it was expected for home sales to hover around 1 million annually according to reports from the Commerce Department.
Also spooking the market, the Federal Reserve has plans to discontinue a $1.25 billion program aimed at lowering mortgage rates and providing tax credits to spur growth. If those measure ends, new-home sales could be even worse off than they are at present.
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