As Washington tries to come up with an agreement on how to solve the current economic crisis, we received more information today on just how bad things are getting, as figures show new home sales were very weak during the month of August.As the credit crunch and falling home values continue to apply pressure to an already weak housing market, the Commerce Department announced today that new home sales in August fell by a sharp 11.5% in August, resulting in a seasonally adjusted sales rate of 460,000 new homes. To find the last time we saw a rate this low, we would have to look all the way back to January of 1991.
As always, Wall Street likes to compare actual numbers to estimates. Had economists been expecting to see a 10% or greater drop in new home sales, that would be one thing, but that was not the case. Going into today's report, economists were expecting to see new home sales fall, though not nearly the 11.5% actual rate, but a much smaller drop of only 1% in the month. So today's reported sales figures are definitely going to add to the confusion that many are feeling regarding the housing market.
What is probably more on the minds of most of us are home prices. We have read a lot about falling home prices lately, and just as recently as Tuesday we saw that July home prices dropped by 5.3% year over year. According to today's report, the average for new home sales in August dropped by a massive 11.8% year over year, down to $263,900, compared to $299,100 during the same period last year.
As we discussed Tuesday, unemployment is a major threat facing the possibility of an economic turnaround, and new figures came out today that showed that unemployment benefits shot up last week to the highest level that we have seen in the past seven years. Not a good sign.
Orders for durable goods were also weak in August, with a larger than expected decline of 4.5%, a drop of $9.9 billion. Economists had been expecting to see a drop of 1.6% in the month. This was the largest monthly drop since January when we saw a decline of 4.7%. Once again, not a good sign for the overall economy.
Definitely a lot of problems for Congress to weigh as it tries to work out a plan to help curb the economic slide.
Of all the problems that are currently facing the economy, which problem do you think requires the most attention, and poses the greatest risk to the overall economy looking ahead?
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
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