Home sales fall in March, but some see a bottom.  Both new and existing home sales declined in March after increasing in February.  The Census Bureau reported that new single-family home sales fell 0.6 percent over the month to a seasonally adjusted annual sales volume of 356,000, down over 30 percent from last year.  New sales increased in the West, but were offset by lower sales in the Northeast and Midwest.  The outstanding glut of unsold new homes has come down significantly from its peak in July 2006, but it would still take more than 10 months to sell off that excess supply at current sales rates (compared to a figure of 5 months or less between 1997 and 2005).  Sales of existing single-family homes fell 2.8 percent in March.  Notably, the distribution of both new and existing home sales has shifted in the direction of lower-priced units, which is indicative of distressed sales and, some say, the entrance of first-time buyers.  (See Chart) With prices continuing to fall, the addition of new buyers to the market will help to further slow the pace of decline.  Furthermore, mortgage interest rates are currently at historically low levels, which may have helped spur new buyers into the market.

Durable goods orders decline less than expected.  The Census Bureau reported that new manufacturer orders for durable goods declined 0.8 percent from February to March, smaller than the 1.5 percent decline expected by the market.  The smaller-than-expected March decline and February’s increase notwithstanding, orders fell nearly 11 percent from the 4th Quarter of 2008 to the 1st Quarter of 2009.  While new orders will not be explicitly represented in the advance Gross Domestic Product (GDP) numbers to be released on Wednesday, changes in inventory investment, which reflects the accounting of new orders that have not been sold and is included in the Census report, does contribute to the investment component of GDP.  The current figures show that inventory investment has declined each month of the 1st Quarter as businesses draw down the stocks they had built up due to slack demand in the latter half of 2008.  These drawdowns will be recorded as a negative contribution to 1st Quarter GDP and will continue to be a drag on economic output as long as businesses wind down excess supply.

First Quarter GDP to be released on Wednesday amid gloomy 2009 forecasts.  As stated above, the Bureau of Economic Analysis will release its advance estimate of Gross Domestic Product (GDP) in the 1st Quarter of 2009.  The market currently anticipates a 4.9 percent decline in real GDP (seasonally adjusted annual rate), smaller than the 6.3 percent decline in the 4th Quarter of 2008.  Forecasts from several organizations show that real output will decline anywhere from 2.6 to 4.0 percent in 2009 and then either grow at a slow rate in 2010 or remain constant in 2010.  Expectations of similar declines across most other nations indicate that it is unlikely that the U.S. economy will be pulled up by an increase in exports.  Unemployment is expected to remain elevated due to the impairment of the financial industry and to the lagging nature of employment gains, which will likely trail behind a recovery in GDP.