AMERICAN HOME MORTGAGE ACCEPTANCE ECONOMIC UPDATE

Sales of new homes slid 5% in January to a seasonally adjusted annual rate of 1.233 million units, the slowest pace since January 2005, the Commerce Department reported February 27. The decline was bigger than expected. Even with the softening sales, new home prices were up in January with the median price climbing to $238,100, up 4% from December, but below the all-time high of $243,900 in October.

Sales of existing homes also fell 2.8% in January, the fifth straight monthly decline, to a seasonally adjusted annual rate of 6.56 million units, the National Association of Realtors said February 28. The median price for a previously owned home in January held steady at $211,000, the same as the December level.

The Commerce Department reported on March 1 that personal spending shot up by 0.9% in January, the strongest gain in six months. Incomes rose by a solid 0.7%, the best showing since September. The bigger rise in spending compared to incomes, however, kept the personal savings rate at a negative 0.7% in January. For 2005, the savings rate was a negative 0.4%, a level not seen since the Depression years of 1932 and 1933.

Reflecting concerns about short-term prospects for the job market, consumer confidence fell from 106.8 in January to 101.7 in February, according to the Conference Board's widely followed index issued February 28. Economists closely track consumer confidence because consumer spending accounts for two-thirds of U.S. economic activity.

(Information provided courtesy of Louise Rose, ELB Mortgage Brokers)