- The Washington Times - Friday, September 28, 2007

ASSOCIATED PRESS

New-home sales tumbled in August to the lowest level in seven years, a stark sign that the credit crunch is aggravating an already painful housing slump.

Sales of new homes dropped by 8.3 percent in August from July, the Commerce Department reported yesterday, driving down sales to a seasonally adjusted annual rate of 795,000 units. That was the lowest level since June 2000, when sales clocked in at a pace of 793,000.

The home sales report came on the same day that the government reported a relatively brisk business growth rate in revised figures for the second quarter. But the 3.8 percent pace is less than previously estimated, and it occurred before the credit crisis and its repercussions across the broad spectrum of the economy took hold.

The median sales price in August fell by 7.5 percent from a year earlier to $225,700 — the biggest drop in percentage terms in nearly 37 years. The median price is the middle point at which half sell for more and half for less. The average sales price dropped 8 percent in August from a year earlier to $292,000. That was the biggest decline in 17 years.

Sales fell in the South and the West in August compared with July. Sales, however, rose in the Northeast and Midwest.

The new-homes sales report along with other recent economic reports showing a sharp drop in demand for big-ticket manufactured goods in August suggest the economy lost momentum as it headed into the fall.

Another report issued by Commerce showed the economy staged a rebound in the spring before a credit crisis raised new fears about longer-term business health.

The economy’s 3.8 percent growth rate in the April-to-June quarter was the strongest showing in just over a year. Although the new reading for the second quarter is slightly less robust than a previous estimate of a 4 percent growth rate, it marks a substantial improvement over the feeble 0.6 percent growth rate registered in the previous quarter.

Gross domestic product is the value of all goods and services produced within the United States and is considered the best barometer of the country’s economic health.

The second quarter’s bounce back came even amid the continuing strain of a housing slump. Builders slashed spending on housing projects by 11.8 percent, on an annualized basis, in the spring. Other businesses boosted spending in the second quarter on such things as equipment, software and construction of new plants and office buildings.

Corporate profits also gained ground in the spring. After-tax profits rose by 5.2 percent in the second quarter, up from a 1.5 percent gain in the first quarter.

The increase in the overall economy’s rate of growth, though, is likely to be fleeting. A deepening housing slump and a painful credit crunch since the spring has darkened the mood of consumers and businesses alike. That leads analysts to predict that economic growth has slowed considerably in the quarter ending Sunday.

The National Association for Business Economics said it thinks growth in the third quarter — the period from July through September — slowed to a pace of 2.4 percent. It predicted the growth rate in the final three months of this year will be 2.5 percent. Others think growth will turn out to be weaker than those projections.

Critical to the economy’s outlook is the health of the jobs market. In yet another report yesterday, fewer people signed up for unemployment benefits last week, raising hopes that the recent weakness in the jobs market won’t last long.

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