NEW HOME SALES DROP 9 PERCENT

NEW HOME SALES DROP 9 PERCENT

Sales of new homes plunged 9 percent in January, pushing the level of sales activity to its lowest point since the end of the last recession, the government reported Wednesday.

The Commerce Department said that sales dropped to a seasonally adjusted annual rate of 535,000 units. It was the third consecutive monthly decline and left sales 26 percent below where they were a year ago.The January decline followed decreases of 6.8 percent in December and 3.4 percent in November as the housing industry continued to be the sector of the economy that has been hardest hit since the October collapse of stock prices.

Consumers, worried about the future following the record 508-point drop in stock prices, stopped looking for new homes, analysts believe.

Housing is often the economic sector that turns down first before the start of a new recession. But despite the weakness in recent months, many economists remain hopeful that recent declines in mortgage rates will spur a rebound in sales and construction in the months ahead.

If the rebound doesn't occur, then concerns about a possible recession this year could increase.

In another weak economic report, the government said Wednesday that orders to U.S. factories for manufactured goods fell 0.6 percent in January, the first decline since a 1.4 percent drop last August.

However, analysts said the January setback was not as weak as it appeared

because it mainly reflected a huge swing in orders for aircraft, which had helped push factory orders up 2 percent in December.

The 9 percent decline in new home sales in January was the steppest decline since a 10.9 percent drop last May. It left sales at the lowest annual rate since December 1982, when the last recession was ending.

The big sales decline was accompanied by a sharp rise in prices, with the median, or mid-point price of a home climbing 9.7 percent to $120,000.

The average price of a home rose to $149,000, up 10.5 percent from

December.