Home Sales Slip Again, Builder Reports Big Loss
Existing home sales slumped again last month, and a large home builder reported its worst-ever quarterly earnings today as fallout from the subprime mortgage crisis continued to cause havoc in the housing sector.
Purchases of previously owned homes in August dropped 4.3 percent from July, sending sales to a five-year low, the National Association of Realtors said this morning. The annual sales rate fell to 5.50 million from 5.75 million in July. Existing home sales are down nearly 13 percent over the last 12 months.
Separately, the home builder Lennar announced the largest quarterly loss in its history after it wrote down $848 million in the value of real estate. The company’s net loss was $513.9 million, or $3.25 a share, compared with profit of $206.7 million, or $1.30 a share, in the period a year earlier.
Shares of Lennar were down 4 percent in midday trading, at $23.20.
The bad news in the housing sector was coupled with a discouraging report on consumer confidence from the Conference Board, whose index dropped to 99.8 in September from 105.6 in August, much more than forecast. The index is now at its lowest level in nearly two years. A weak job market and stagnant salary growth has caused anxiety among consumers, analysts said, suggesting potential declines in consumer spending and job creation over the coming months.
“It’s just a very negative environment here for residential real estate, which obviously feeds back into consumer attitudes and consumer spending,” said Joshua Shapiro, the chief United States economist for MFR, a New York research firm.
Lennar reported a 44 percent drop in revenue last quarter and has reduced its work force by 35 percent, another victim of the high inventory levels and credit market turmoil that have buffeted home builders this year. The company’s chief executive, Stuart A. Miller, said in a statement today that Lennar had seen “continued deterioration of our net margin and accordingly, higher impairments to our inventory.” Mr. Miller said further staff reductions were in store for the fourth quarter.
The percentage of consumers who plan to buy automobiles or homes in the next six months dropped from July, the Conference Board said. At the same time, the median sale price for homes fell to $224,500, down more than $4,000 from July, though that figure is slightly up from last August. Inventories of unsold homes rose 0.4 percent in August, to 4.58 million, a 10-month supply at the current sales rate. That compared with a 9.5-month supply in July.