WASHINGTON Sales of new homes rose in July, but still fell short of economists' expectations, and home prices continued to sink.
The Commerce Department reported Tuesday that new-home sales rose by 2.4 percent last month to a seasonally adjusted annual rate of 515,000 units, the most since April. But sales in June had plummeted to a pace of just 503,000 down from previous estimates of 530,000 to mark the worst showing since September 1991.
Economists forecasted sales to drop in July, but expected the pace to be around 525,000. Given June's sharp downward revision, the level of home sales in July turned out to be less than analysts were anticipating.
Even with the over-the-month increase, new-home sales are down a whopping 35.3 percent from last July, underscoring just how much the housing market has eroded.
Home prices also continued to sag.
The average price of a new-home sold in July was $294,600, down 4.1 percent from a year ago. The median home price where half sell for more and half for less was $230,700, down 6.3 percent from last year.
A separate report, released Tuesday, showed that home prices dropped by the sharpest rate ever in the second quarter. The Standard & Poor's/Case-Shiller U.S. National Home Price Index tumbled a record 15.4 percent during the April-June period.
The National Association of Realtors reported Monday that sales of previously-owned homes rose in July as discounts lured buyers. However, the number of unsold properties hit an all-time high, an indication that the worst housing slump in decades is far from over.
Fallout from the housing crisis is one of the biggest problems facing the country. It has figured prominently into the economy's sharp slowdown. Foreclosures have climbed to record highs, financial companies have chalked up multibillion-dollar losses, and home builders have been clobbered.
Earlier this month, Horsham, Pa.-based homebuilder Toll Brothers Inc. reported dismal third-quarter results as its revenue fell 34 percent and its order backlog plunged 52 percent. Atlanta-based Beazer Homes USA Inc. also reported a difficult third quarter, as revenue fell by 40 percent.
Consumers have watched their single-biggest asset slump in value, making them feel less wealthy and less inclined to spend.
A growing number of analysts believe the economy will hit another deep pothole later this year as the bracing effects of the government's tax rebates fades.
The Federal Reserve, however, can't afford to slice interest rates further to bolster the fragile economy out of fears it will worsen inflation. The Fed in June ended its most aggressive rate-cutting campaign in decades. Economists believe the Fed will leave rates alone when it meets next on Sept. 16, as well as through the rest of this year.
Even with the government's housing-rescue package signed into law by President Bush last month, foreclosures are expected to keep rising into next year.
Meanwhile, there's questions about the future ability of mortgage finance giants Fannie Mae and Freddie Mac to supply money for home loans. The two companies have cut back the availability of mortgages as they cope with growing losses from foreclosures. The companies' stocks have been hammered recently as investors become increasingly convinced that a government bailout will be needed.