New Home Sales Plummet

Existing Homes Sell Well, But Once-Booming Market Cools Off

(CBS/AP)  The slowdown in sales pushed the inventory of unsold homes up to a record of 548,000 at the end of February. At the February sales pace it would take 6.3 months to sell all of the homes on the market, up from 5.3 months in January.

Analysts believe that the growing backlog of unsold homes will start to put more pressure on home sellers to reduce prices in the months ahead.

Economists still believe that housing is likely to see a moderate slowdown this year rather than anything as severe as the bursting of the speculative bubble in stock prices at the beginning of this decade. That decline was severe enough, wiping out trillions of dollars in wealth, that it helped pushed the economy into a recession.

The report on orders for durable goods showed that the strength came from a 52.5 percent surge in demand for commercial aircraft, a rebound after a 70.1 percent drop in January aircraft orders.

Excluding transportation, orders fell by 1.3 percent last month, the weakest showing in this category since last July. But analysts noted that this drop followed strong gains in the non-transportation area in the previous two months, a good signal for future growth.

"The bottom line here is that industry is doing well," said Ian Shepherdson, chief U.S. economist for High Frequency Economics.

While total transportation orders rose by 13.4 percent, that reflected the 52.5 percent rise in civilian aircraft. Demand for military aircraft fell by 16.7 percent.

Orders for motor vehicles dropped by 3.3 percent in February after a 3.2 percent decline in January. American automakers have been struggling with increased foreign competition and sagging demand for sport utility vehicles in the face of rising gasoline prices.

On Wednesday, General Motors Corp. and its major parts supplier, Delphi Corp., announced plans to offer buyouts to more than 125,000 hourly workers under an agreement with the United Auto Workers. Workers are expected to start leaving GM by June 1.

GM wants to eliminate some 30,000 jobs by 2008.

It was one of the largest buyout offers in corporate history, and came as GM sought to deal with massive losses by trimming labor costs. GM has been losing market share to foreign competition.

The 2.6 percent increase in overall orders was the biggest gain since a 5.3 percent rise last November. It left total orders at $215.8 billion last month, an increase of $4.99 billion.