Wall Street getting worried
Subprime problems could lead to other credit woes - affecting firms' ability to borrow.
WASHINGTON - Sales of new homes tumbled in June by the largest amount in five months, provoking new worries on Wall Street about how much the national economy would be harmed by a prolonged housing slump.
The Commerce Department said yesterday that sales of new single-family homes fell 6.6 percent last month to a seasonally adjusted annual rate of 834,000 units. The decline was more than triple what had been expected and was the largest percentage drop since sales fell 12.7 percent in January.
The fall in new-home sales was the latest evidence this week of the housing industry's troubles. A government report Wednesday said sales in the much larger existing-home market also fell in June, dropping 3.8 percent to an annual rate of 5.75 million units, the slowest pace in nearly five years.
Also this week, Countrywide Financial Corp., one of the nation's largest mortgage lenders, reported a sharp drop in second-quarter profit, saying that rising default rates were spreading from subprime to more conventional mortgages. Subprime loans are those made to borrowers with shaky credit histories.
Yesterday, D.R. Horton Inc., one of the nation's largest home builders, posted a third-quarter loss of $824 million, as the Fort Worth, Texas, company wrote down the value of unused land. In the 2006 quarter, it earned $293 million.
"It is unclear to us when the housing recovery will begin. . . . We don't see one on the horizon," Horton chief executive officer Donald J. Tomnitz said.
All of these developments unnerved Wall Street, which is growing worried that the problems with subprime mortgages could be a harbinger of more widespread credit problems - especially affecting companies' ability to borrow.
Analysts also blamed increases in mortgage rates in June for pushing existing-home sales lower.
Sales of new homes are now 22.3 percent below where they were a year ago.
For June, the inventory of unsold new homes was unchanged at 537,000 units, still high by historical standards.
The median price of a new home sold last month dropped to $237,900, down 2.2 percent from a year ago. The median price is the point where half the homes sold for more and half for less.
By region of the country, new-home sales fell 27.1 percent in the Northeast, 22.5 percent in the West and 17.1 percent in the Midwest. Only the South saw an increase in sales, a gain of 7.6 percent.
Other economic news yesterday was more positive. The Commerce Department said orders for big-ticket manufactured products rose 1.4 percent last month, with the strength coming from a rebound in commercial aircraft. But demand for many other durable goods actually fell in June.
The number of newly laid off workers filing claims for jobless benefits fell 2,000 to 301,000 last week. The performance was slightly better than economists expected.