Home Sales and Prices Fall Sharply

New York Times (09/28/07) P. C1; Grynbaum, Michael M.The U.S. Commerce Department reports that sales of new homes slid to an annual pace of 795,000 in August, a drop of 8.3 percent from July as the number of months needed to unload builder inventories climbed to the highest level since the end of this year's first quarter. At the same time, the median price for a new residence decreased 7.5 percent from a year ago to $225,700--the sharpest monthly decline since December 1970. August's drop-off in new-home sales was largely concentrated in the South and West, the two regions most affected by the subprime mortgage crisis. Lehman Brothers economist Michelle Meyer warns, "If sales continue to fall, builders will continue to cut back on construction, which will be a direct drag to economic growth. Inventories remain elevated, home prices will fall as a result, and a decline in home prices will depress consumer spending."