From Bloomberg:
Purchases of new homes in the U.S. dropped more than forecast in June, signaling no end to the real- estate slump that's weakened the economy.
Sales fell 6.6 percent, the most since January, to an annual pace of 834,000 last month from a revised 893,000 rate the prior month that was less than previously estimated, the Commerce Department said today in Washington.
Builders may have to cut prices even more and sweeten incentives to turn sales around and trim bloated inventories. Rising mortgage rates and stricter rules to qualify subprime borrowers with poor credit histories will extend the worst housing slump in 16 years and continue to slow growth.
``The subprime debacle is definitely hurting,'' said Zoltan Pozsar, senior economist at Moody's Economy.com in West Chester, Pennsylvania, whose forecast matched the lowest at 850,000. ``This points to further construction drag on growth.''
The South -- which is the biggest region -- saw an increase of 7.6%. This was the only region with good news. The Midwest dropped 17.1%, the West dropped 22.5% and the NE dropped 27.1%. The number of new houses for sale remained the same, but the months supply increased to 7.8%.
These are really big drops and they indicate the correction may be accelerating.
The short version is simple: this report stinks. It confirms all of the bad earnings reports we have been getting from the homebuilders. It also indicates the credit tightening we have been hearing about is probably taking effect and tightening demand.
