New home sales hit 7-year low

Mortgage Meltdown 2007

Sales weaker than forecasts as lower prices can't clear out glut; pace of sales falls to levels not seen since June 2000.

NEW YORK (CNNMoney.com) -- The pace of new home sales fell to a seven-year low in August, according to a government report Thursday that showed the battered housing and home building markets even worse than forecasts.

New homes sold at an annual pace of 795,000 in August, according to the Census Bureau, down 8 percent from the revised 867,000 sales pace in July.

It was the slowest pace of sales since June 2000, as buyers had trouble finding mortgages or selling their existing homes. Economists surveyed by Briefing.com had forecast that sales would fall to a pace of 840,000.

The report also showed the median price of a new home fell 7.4 percent from year earlier levels to $225,700 in the month, as prices were pressured by both the problems in mortgage finance and the glut of homes on the market. The inventory of new homes on the market rose to an 8.2 month supply, as the glut of completed homes without a buyer was near a record high.

On Tuesday, a report from the National Association of Realtors showed the pace of existing home sales dropped in August for the sixth straight month to their lowest level in five years.

And the new home sales report did a better job capturing the turmoil in the new home market in August, as it is based on contracts for new homes sold in the month. The existing home sales figures are based on when a deal is closed, typically a month or two after the contract is signed.

The nation's major home builders have been hammered by the downturn in both home sales and prices in the last year. On Thursday, KB Home (Charts, Fortune 500), the nation's No. 5 home builder, reported a loss in its most recent quarter, compared to a solid profit a year ago, as the company warned it expects conditions to worsen through 2008.

Lennar (Charts, Fortune 500), the nation's No. 1 home builder by revenue, posted a bigger than expected loss Tuesday.

In addition, No. 2 homebuilder D.R. Horton (Charts, Fortune 500) and No. 3 Centex (Charts, Fortune 500) both reported losses far bigger than Wall Street had expected, while No. 4 Pulte Homes (Charts, Fortune 500) and No. 6 Hovnanian Enterprises (Charts, Fortune 500) both have reported losses for the last two quarters and analysts project losses for at least the next year.