Still slumping: New home sales drop again

updated 1:23 p.m. ET July 25, 2008

WASHINGTON - Sales of new homes fell in June for the seventh time in the past eight months, but the decline was less than had been expected, raising faint hopes that the nation’s severe housing recession could be approaching a bottom.

The Commerce Department reported Friday that sales of new single-family homes dropped by 0.6 percent last month to a seasonally adjusted annual rate of 530,000 units. That was less than half the decline that had been expected and the May performance was revised up a bit.

Even with the changes, new home sales were down by a sharp 33.2 percent from a year ago, showing how severe the slump in housing has become.

But some analysts said they saw cause for optimism that the worst of the decline could be drawing to a close, especially if a sweeping housing rescue package now pending in Congress can slow a flood of foreclosures and spur sales to first-time home buyers.

Analysts noted that not only was the overall decline in June from May less than expected but sales were up in two of the four regions of the country.

Brian Bethune, chief U.S. financial economist at Global Insight, said the numbers gave a “few positive flickers, but the housing market remains extremely fragile.”

The nation is enduring a steep downturn in housing that has pushed the overall economy close to a recession. It has also triggered a severe credit crunch, forcing U.S. financial institutions to cope with billions of dollars of losses from bad mortgage loans.

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A separate report Friday showed that the number of households facing the foreclosure process more than doubled in the second quarter compared to a year ago. Nationwide, 739,714 homes received at least one foreclosure-related notice during the quarter, or one in every 171 U.S. households, according to Irvine, Calif.-based RealtyTrac Inc.

Wall Street took a positive view of the housing data with the Dow Jones industrial average up by 7.33 points in afternoon trading.

Investors were also bolstered by some good news about consumers. The Reuters/University of Michigan index of consumer sentiment for the first part of July came in at 61.2, slightly better than the 28-year low of 56.4 hit in June.

The National Association of Realtors reported Thursday that sales of existing homes — which make up the bulk of the home sales market — dropped by 2.6 percent in June to a seasonally adjusted annual rate of 4.86 million units, the slowest pace in a decade.

The report on new home sales showed that the median price of a new home sold in June fell by 2 percent compared to a year ago.

Sales were down the most in the South, a drop of 2 percent, with sales falling 0.9 percent in the West. These declines were offset somewhat by sales increases of 5.3 percent in the Northeast and 2.5 percent in the Midwest.

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