Sales of new homes in the U.S. fell in November to a 17-year low as credit dried up and consumer confidence sank. Purchases dropped 2.9 percent to an annual pace of 407,000, lower than forecast, according to figures from the Commerce Department today in Washington. The median sales price declined 11.5 percent from a year earlier. The housing recession and credit crisis may extend into 2009, signaling little relief for the broader economy. The Federal Reserve last week dropped its target rate to as low as zero to spur lending, while President-elect Barack Obama has pledged to work to halt foreclosures, boost housing and provide a ``jolt'' to the economy. ``The housing market is still trying to find a bottom, and the rapidly deteriorating economy is making it all the more difficult,'' Ryan Sweet, a senior economist at Moody's Economy.com in West Chester, Pennsylvania, said before the report. Economists forecast new home sales would drop to a 415,000 pace, according to the median forecast in a Bloomberg survey of 65 economists. Estimates ranged from 343,000 to 435,000. Commerce revised the October sales pace down to 419,000 from the 433,000 rate previously reported. The median price of a new home decreased from the same month last year to $220,400. Sales of new homes were down 35 percent from November 2007. The housing report showed builders succeeded in trimming inventories even faster than sales dropped. The number of homes for sale fell a record 7 percent to a seasonally adjusted 374,000, the fewest since February 2004. Supply Falls The supply of homes at the current sales rate dropped to 11.5 months' worth from 11.8 months the prior month. That is still twice as much as the five to six months supply that the National Association of Realtors has said is consistent with a stable market. New-home purchases, which account for less than 10 percent of the market, are a timelier indicator than existing sales because they are based on contract signings. Sales of previously owned homes, which make up more than nine tens, are compiled from closings and reflect contracts signed weeks or months earlier. Sales of new houses dropped in two of four regions, led by a 16 percent slump in the Midwest, where purchases dropped to the lowest level since 1982. Purchases rose 14 percent in the Northeast and 11 percent in the West. Home sales and prices have been falling since 2005 and declining residential construction has detracted from economic growth since early 2006. Prices, Foreclosures Falling home prices and record foreclosures have touched off a wave of defaults on mortgage-backed securities that infected the global banking system. That's created a spiral of falling property values, tighter credit and slumping spending. ``Declining house prices, delinquencies and foreclosures and strains in mortgage markets are now symptoms as well as causes of the general financial and economic difficulties,'' Fed Chairman Ben S. Bernanke said Dec. 4 at a Fed conference in Washington. Lending has dried up, banks have failed and 1.9 million Americans have lost their jobs this year, as the economy struggled with what's shaping up to be the longest recession in the postwar era. The Fed has led coordinated rate cuts around the world to bolster capital markets and revive credit. Noting that ``the outlook for economic activity has weakened further,'' the central bank on Dec. 16 cut its key target rate to as low as zero from 1 percent and pledged to ``employ all available tools'' to restore growth in the flagging economy. Homebuilder losses are still climbing. Lennar Corp., a U.S. home construction company that builds in 14 states, reported its seventh straight quarterly loss as mounting job losses and record foreclosures cut demand. ``Frankly, we're in the midst of a downward spiral and the momentum is building,'' Chief Executive Officer Stuart Miller said on a conference call with analysts last week. ``As we moved into October, November, the market got materially worse.'' To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net

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