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New home sales fall, factory orders drop By MARTIN CRUTSINGER, AP
Economics Writer

Sales of new homes fell in February for the fourth straight month,
pushing activity down to a 13-year low as the steep slump in housing
continued.

The Commerce Department reported Wednesday that new home sales dropped
1.8 percent last month to a seasonally adjusted annual rate of 590,000
units, the slowest sales pace since February 1995. The decline was
slightly worse than expected.

The median price of a home sold last month dropped to $244,100, down
2.7 percent from the level of a year ago.

The prolonged slump in housing has dragged down overall economic
activity. Many analysts believe the slump could combine with a
multitude of other problems including a severe credit crunch, soaring
energy prices and plunging consumer confidence, to push the country
into a full-blown recession.

The number of unsold homes on the market at the end of the month
represented a 9.8 months' supply at the February sales pace, the same
as in January. That was the highest inventory level in more than 26
years and reflects the fact that increased numbers of mortgage
foreclosures are dumping even more homes on an already glutted market.

Sales dropped the most in the Northeast, falling by 40.6 percent.
Sales were also down in the Midwest, dropping by 6.4 percent, but
posted gains in the South of 5.7 percent and 0.7 percent in the West.

Many analysts believe that the slump in housing, which began in 2006,
could last into 2009. It was reported on Tuesday that the Standard &
Poor's/Case-Shiller index of home prices fell nearly 11 percent in
January from a year ago, the biggest year-over-year decline in the
history of the index.

Analysts said that housing is being hurt currently by tighter lending
conditions as banks react to soaring mortgage defaults and the
reluctance of prospective buyers to make a decision, fearing that
prices have further to fall.

In other economic news, orders to factories for big-ticket
manufactured goods fell 1.7 percent in February, a second consecutive
decline and further evidence of the economic troubles gripping the
country.

The declines in orders for durable goods, items expected to last at
least three years, showed up in a number of areas. Demand for
manufacturing equipment plunged by 13.3 percent, the largest amount on
record, while orders for nondefense capital goods excluding aircraft,
the category that is seen as a good proxy for business investment,
fell by 2.6 percent, the biggest decline in four months.

Economic growth slowed to a barely discernible 0.6 percent in the
final three months of last year, and many economists believe the gross
domestic product will turn negative in the current quarter, signaling
the start of a recession.

The 1.7 percent drop in orders for durable goods, items expected to
last at least three years, was worse than the 1 percent increase that
many economists had expected.

The weakness came even though orders for transportation equipment
rebounded with a 0.6 percent rise in February after a big 12.6 percent
plunge in January. The swing in both months reflected changes in
demand for commercial aircraft, which rose 5.4 percent in February
following a 30.2 percent plunge in January. Orders for motor vehicles
fell by 2.7 percent in February as U.S. automakers continued to face
weak demand, reflecting the weak economy and soaring energy prices.

Excluding transportation, orders fell by 2.6 percent in February,
representing the fourth decline in the past five months.

Economists believe that if the country does slip into a recession, the
downturn may not be as severe in manufacturing, which is being helped
by continued strong growth overseas, which is bolstering U.S. exports.