New home sales fall to a 7-year low

This is off The Washington Post:

WASHINGTON -- New-homes 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 8.3 percent in August from July, the Commerce Department reported Thursday, driving down sales to a seasonally adjusted annual rate of 795,000. That was the lowest level since June 2000.

"This is just hideous," said Ian Shepherdson, chief economist at High Frequency Economics.

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 was less than previously estimated and it occurred before the credit crisis and its repercussions across the broad spectrum of the economy had taken hold.

Home prices tanked.

The median sales price in August fell by 7.5 percent from a year earlier to $225,700. That was 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 by 8 percent in August from a year earlier to $292,000. That was the biggest decline in 17 years.

There is not much more to say here, except that the housing mess is starting to take its toll on the U.S. economy. This huge drop in new home sales is forcing home construction companies to cut back on their own construction projects, while prices are dropping due to the 10-month glut of unsold homes on the market. And prices are dropping because of this huge supply of unsold homes on the market. This housing mess is going to stay with us for the next couple of years.