U.S. home sales plunge

Worsening house market slump is heightening fear that the American economy may be thrust into recession

The United States housing market plunged deeper into despair last month, with sales of new homes plummeting to the lowest level in more than 12 years. The slump worsened more than most analysts expected, heightening fears that the country may be thrust into a recession.

New-home sales tumbled 9 per cent in November from October to an annual sales pace of 647,000, the commerce department said yesterday. That was the slowest sales pace since April 1995.

“It was ugly,” said Richard Yamarone, an economist at Argus Research. “It is the one sector of the economy that doesn’t show any signs of life. It doesn’t look like there is any resuscitation in store for housing over the next year.”

Over the year and countrywide, new-home sales tumbled 34.4 per cent, the biggest annual slide since early 1991 and stark evidence of the painful collapse in the once-high-flying housing market.

“I think you can classify what we are seeing in the housing market as a crash,” said Mark Zandi, chief economist at Moody’s Economy.com. “Sales and home prices are in a free fall. The downturn is intensifying.”

The median sales price of a new home ““ half sold for more, half for less ““ fell to $239,100 (U.S.) in November, down 0.4 per cent from a year earlier. Would-be home buyers have found it more difficult to secure financing, especially for “jumbo” mortgages exceeding $417,000.

Unsold homes have piled up, which will force builders to cut back even more on construction and look for ways to sweeten the pot to lure prospective buyers. The housing market’s plunge has followed five years of record-breaking activity from 2001 through 2005.