The US housing industry is paying a huge price for not keeping the constants of demand and supply intact. The latest data shows that new home sales saw the steepest plunge in 13 years in January 2008. This is expected to further deteriorate by the slow down looming large on the US economy.
The median price of a new home dropped from 2.1% a year earlier to $239,800, although that was $400 above the December price level. Median is the point at which half the homes sell for more and half sell for less. 175,000, ready to occupy homes is putting extra pressure on the downward spiral of housing prices.
The Commerce Department reported on Monday that sales of new homes drastically came down by 26.4 percent last year to 774,000. In 1980 the fall was to the tune of 23.1 percent, but last year’s sales slump has broken that record too. More alarming statistics show that last month sales is now down by 56.5 percent from the monthly high reached during July 2005, that too with relatively cheaper current prices .
Many experts believe the federal cut on interest rate on a regular basis since the latter half of 2007 is a very late action despite early warnings. Full-fledged panic in the market can cause unimaginable strain on the economy which perhaps goes for a roll to complete the whole cycle.
At this point, President Bush and House leaders reached an agreement to provide $150 billion economic stimulus package to resuscitate the housing industry at the earliest. But analysts add that in addition to monetary package there should be clear-cut policies to encourage and empower consumers to return with their need based activities.
If the policies are aimed at finding a solution the country can certainly come out of the crisis. At this juncture, the country needs political consensus to solve the present crisis and that is likely to be illusive in the presidential election year. Unfortunately, one has to lend credence to the experts who forecast a gloomy picture for the housing market even in 2008.