New home sales probably dropped to the lowest level in seven years in July, showing a deepening housing recession that will drag down U.S. economic growth.
Purchases fell to an annual rate of 820,000 last month from 834,000 in June, according to the median forecast of 73 economists surveyed by Bloomberg News. That would be the slowest pace of sales since June 2000.
A continuing slump in housing may undermine the Federal Reserve’s efforts to stabilize U.S. credit markets, which have been roiled by losses on securities backed by subprime mortgages. Americans are finding it more difficult to buy homes as mortgage rates rise and banks tighten requirements for getting a loan.
“It’s hard to imagine that we’re anywhere near a turnaround,” Brian Bethune, an economist at Global Insight Inc. in Lexington, Massachusetts, said before today’s report. “We’re certainly not going to see an inflection point until the dust has settled on the current credit conditions problem.”
The Commerce Department is scheduled to release the new home sales report at 10 a.m. in Washington. The department is also forecast to say at 8:30 a.m. that orders for goods meant to last several years rose 1 percent in July, according to a Bloomberg News survey of economists. Excluding transportation, bookings increased 0.6 percent, after a 1 percent drop in June.
Economists’ estimates for new home sales ranged from 770,000 to 860,000. Purchases have risen in just one month so far this year.
Fed officials, who said all year that the housing slump was contained, have acknowledged the downturn will extend further than they anticipated.
“Recent data on actual housing market activity have dampened my optimism” about a bottoming-out in the industry, Richmond Fed President Jeffrey Lacker said on Aug. 21. Tighter credit conditions “could further dampen residential investment,” he added.
Even before last week’s market rout, the National Association of Realtors lowered its 2007 forecast for new and existing home sales for an eighth time this year. The Chicago- based group forecast that new home purchases will total 852,000 this year, down from 1.05 million in 2006.
“Larger declines in residential construction are quite possible,” said Steven Wieting, managing director of economic and market analysis at Citigroup Global Markets Inc. in New York.