The housing market continues to struggle as existing home sales in February decreased 0.6% and new home sales were off 2.2%.

Gross Domestic Product
The Bureau of Economic Analysis’ (BEA) third estimate of fourth quarter 2009 gross domestic product (GDP) shows that the economy grew at a 5.6% annual rate for the quarter. That is the strongest quarterly growth reported in the past six years but 0.3% lower than BEA’s estimate released last month. Downward revisions were made to inventories, consumer spending, and business investment. Corporate profits rose $109 billion during the fourth quarter, as costs were slashed and volume grew. Compared to the fourth quarter of 2008, GDP increased 0.1%, the first year-over-year increase since the third quarter of 2008. For all of 2009, real GDP plummeted 2.4%, the largest one-year contraction since the Great Depression. Going forward, economic growth will moderate as consumers worry about the condition of the labor market and as government stimulus money dries up.

Existing Home Sales
The National Association of Realtors reported that existing home sales decreased 0.6% in February to a seasonally adjusted 5.0 million homes sold at an annual rate. In January, existing home sales plummeted 7.2%. Compared to February 2009, existing home sales are up 7.0%. The inventory rate increased to 8.6 months in February, from 7.8 months in January. Moreover, the median sales price for an existing home inched upward to $165,100 in February, from $164,900 in January. Potential buyers remain cautious because of the uncertain labor market and tightened credit.  Over the next year, a gradual improvement in home sales and prices is expected.

New Home Sales
The Census Bureau reported that new home sales decreased 2.2% in February to an annualized rate of 308,000. Sales in January showed a loss of 8.7%. New home sales are 13.0% lower than their February 2009 levels.  Inventory on the market increased 0.3 months to 9.2 months. The median sale prices increased to $220,500 from $207,900 in January. New home sales may slip further into negative territory as foreclosed homes glut the broader housing market. Also, the debilitating blizzards in February likely stalled projects and prevented potential buyers from researching purchases.

Durable Goods
Durable goods orders rose 0.5% in February following a 3.9% surge in January.  Excluding transportation, February orders increased 0.9% from the previous month. Core capital goods increased 1.1%. Unfilled orders and inventories rose at a rate of 0.4% and 0.3%, respectively, while shipments dropped 0.6%. February’s report is the third one in a row to show an increase in durable goods orders. Manufacturing is on the rebound as businesses replenish their diminished inventories.