Just like you never want to hear a doctor say "oops" in the operating room, you never want to see a going-concern statement in a financial report about a company you own. Accountants throw these in when they've been over the books, talked to customers, and checked the horoscopes and have concluded there is "substantial doubt" about a company's ability to remain in business. In short, don't blame the accountants if the company files for bankruptcy protection.

You¿d reckon that a going-concern statement would be enough to send investors running to the exits, but it's not. True, many large institutions automatically bail when an existing company gets slapped with one of these, but many individuals (often wrongly) take a chance they know more than the bean counters.

During the tech boom of the late 1990s, many companies actually went public even though they had been hit with going-concern statements. Many of those companies subsequently disappeared. Enough said.

Home / Markets / Economy

Tuesday, May 27, 2008

New Home Sales Post Unexpected Increase in April

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Associated Press

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Sales of new homes rose in April for the first time in six months although the unexpected increase still left activity near the lowest level in 17 years.

The Commerce Department reported Tuesday that sales of new homes rose 3.3% in April to a seasonally adjusted annual rate of 526,000 units.

But the government revised March activity lower to show an even bigger drop of 11% to an annual rate of 509,000, which was the weakest pace for sales since April 1991. Economists believe that new home sales will remain weak for some time as the housing industry struggles with falling prices and rising mortgage foreclosures, which are dumping even more homes on an already glutted market.

The Commerce report showed that the median price of a new home sold in April dropped to $246,100 in April, down 4.2% from April 2007.

A separate report showed home prices falling during the first three months of this year at the sharpest rate in two decades. The Standard & Poor's/Case-Shiller index fell 14.1% in the first quarter compared with a year earlier, the biggest year-over-year decline since the index began in 1988.

The Commerce report on new home sales showed the April rebound was led by a huge 41.7% surge in sales in the Northeast. Sales were up 8.3% in the West and 5.8% in the Midwest. The only region which saw a decline in sales in April was the South, where sales fell by 2.4%.

The inventory of unsold new homes edged down slightly to 10.6 months' supply at the April sales pace, compared with 11.1 months in March. However, the April level was still about double the inventory level that was normal during the five-year housing boom.

That boom ended in 2005 and since that time the housing industry has been struggling in a tough environment with falling sales and prices and rising mortgage defaults.

Economists believe that home prices will remain under pressure until the sizable level of inventories is worked down to more manageable levels. Many analysts don't expect to see a rebound in prices until sometime next year.