Housing Slump: Utah New Home Sales Fall, Building Permits Slide

Sales of new homes tumbled nationally in August while the number of construction permits in Utah dropped to their lowest level in years, a stark sign that the credit crunch is aggravating an already painful housing slump.

Nationally, sales of new homes dropped by 8.3 percent in August from July, the Commerce Department reported Thursday, driving down sales to a seasonally adjusted annual rate of 795,000 units. That was the lowest level since June 2000, when sales clocked in at a pace of 793,000.

Along the Wasatch Front, builders took out permits for the construction of 906 homes in August, a 39 percent decline from 1,483 in August 2006, according to Construction Monitor, a company that tracks building activity throughout the West. Permit levels for August in the Salt Lake area are the lowest since the same month of 1997.

“We’re just seeing a big drop throughout the West,” said Justin Harris of Construction Monitor. “But the Wasatch Front isn’t seeing the worst drop. Parts of California are worse, Las Vegas is worse and Phoenix is worse.”

The median home sales price nationally in August fell by 7.5 percent from a year earlier, to $225,700. That was the biggest drop in percentage terms in nearly 37 years.

The median price is the middle point at which half sell for more and half for less. The average sales price dropped by 8 percent from a year earlier, to $292,000.

That was the biggest decline in 17 years.

Also Thursday, Homebuilder KB Home swung to a loss in the third quarter and warned that the beleaguered housing market is likely to worsen next year.

The Los Angeles-based company, one of the nation’s biggest home sellers, reported a loss of $35.6 million, or 46 cents per share, for the period ended Aug. 31, compared with profits of $153.2 million, or $1.90 per share, in the year-ago period.

On Tuesday, Miami-based Lennar Corp. reported a third-quarter loss of more than $510 million due to falling sale prices and home deliveries. The company also said it had cut its work force by 35 percent and warned it expected further job cuts.

Freddie Mac, the mortgage company, also reported Thursday that 30-year, fixed-rate mortgages averaged 6.42 percent this week, up from 6.34 percent last week, which also had seen a hike from the previous week.

Two weeks ago, the nationwide average for 30-year mortgages had dipped to 6.31 percent, the lowest level since May 17. That decline reflected a flight to safety after the turbulence in credit markets, which had increased demand for Treasury securities.

Those securities heavily influence mortgage rates.

Rates on 15-year fixed-rate mortgages, a popular choice for refinancing, averaged 6.09 percent this week, up from 5.98 percent last week.

While rates on 30-year and 15-year mortgages rose this week, rates on five-year adjustable-rate mortgages and one-year ARMs declined for a fourth straight week.

Home sales fell in the South and the West in August, compared with July. Sales rose in the Northeast and Midwest.

The new-homes sales report, combined with other recent economic reports showing a sharp drop in demand for big-ticket manufactured goods in August, suggested the economy lost momentum as it headed into the fall.

On Wall Street, investors looked to the weak home sales report as justification for another rate cut by the Federal Reserve.

Fears that the troubled housing market and credit problems could short-circuit the six-year-old economic expansion have shaken Wall Street.

The biggest worry is that people and businesses will cut back on their spending and investment, throwing the economy into a tailspin.

Former Federal Reserve chief Alan Greenspan, in an interview with The Associated Press last week, said the odds of a recession are higher than one-in-three but are still under 50 percent.

To help protect the economy from the ill effects of the housing slump and credit crunch, the Federal Reserve last week slashed a key interest rate. The hope is that lower rates will induce more spending and investment and thus energize overall economic activity. Analysts believe another rate cut will come in late October.

The worst housing slump in 16 years is being painfully felt. Higher interest rates squeezed homeowners, especially subprime borrowers with blemished credit or low incomes. Foreclosures set records and late payments spiked. Lenders were forced out of business. Hedge funds and other investors in subprime-related mortgage securities got clobbered.

Housing slump: Utah’s new-home sales fall, building permits slide