Sales of new homes plunged to a record low in January, underscoring the formidable challenges facing the housing industry as it tries to recover from the worst slump in decades.
The Commerce Department reported Wednesday that new home sales dropped 11.2 percent last month to a seasonally adjusted annual sales pace of 309,000 units
, the lowest level on records going back nearly a half century. The big drop was a surprise to economists
who had expected sales would rise about 5 percent over December's pace.
The January decline will heighten fears about the fledgling recovery in housing. Economists were already worried that an improvement in sales in the second half of last year could falter as various government support programs are withdrawn
A $1.25 trillion program from the Federal Reserve which has held down mortgage rates is set to end March 31 and tax credits to bolster home buying are scheduled to expire at the end of April
Though the overall economy started growing again this past summer, economists are worried because unemployment remains high. This weakness is causing consumers to shy away from spending, especially on big-ticket items such as homes
The Conference Board reported Tuesday that its Consumer Confidence Index fell almost 11 points to 46 in February
, pushing the index down to its lowest reading since last April. At 46, the index is a long way from the 90 reading that economists generally view as depicting healthy consumer attitudes