New-home sales fell for the fourth-straight month in August to the lowest level in a half-year as the bursting of the housing bubble continues to plague the U.S. economy.
Sales fell by 2.3% on a monthly basis to a seasonally adjusted annual rate of 295,000, the Commerce Department said Monday. It was the weakest pace in six months and the seventh-worst month on records dating back to 1963.
The results, however, were in line with forecasts, and July’s results were revised upward slightly to a rate of 302,000. Compared with a year earlier, when new home sales hit a record-low pace of 278,000, new home sales were up 6.1%.
August was an especially weak month for the new-homes market for several reasons. Turmoil in financial markets after Standard & Poor’s unprecedented downgrade of U.S. debt, fears of a renewed recession and Hurricane Irene all combined to keep buyers away.
Given all those negative factors, “we are moderately relieved at this number,” wrote Ian Shepherdson, chief U.S. economist at High Frequency Economics. “Still, the market is dead, and even record-low mortgage rates are not doing anything to help.”
New-home sales are down by nearly 80% from their peak in July 2005. They remain far below healthy levels, considered to be an annual rate of around 750,000.
Consumers have slowed their spending sharply this year, pulling down economic growth and preventing unemployment from falling. High joblessness and a weakening economy are raising Americans’ doubts about their prospects for the future, leading many to save money and pay down debts rather than taking out loans.
Many people can’t get financing due to tight lending standards enacted after the housing bust.
The weak state of the housing market has concerned the Obama administration and Federal Reserve. The Obama administration and federal regulators are working on steps to allow more borrowers to refinance at ultra-low rates. And last week, the Fed announced it would begin putting payments from its portfolio of government-backed mortgage bonds back into mortgages. That pushed down mortgage rates to below 4% for a 30-year fixed loan.
Still, the Fed’s move isn’t expected to do much for home purchases. Many people aren’t buying — and sellers aren’t selling — homes because prices keep dropping. The median price in August for a new home, at $209,100, was down 7.7% from a year earlier.
Consumers who are buying homes often are opting for foreclosed properties and other previously owned homes, which tend to be cheaper than new houses.