U.S. new home sales fall for 4th month

U.S. new home sales fell 0.7 per cent in July for the fourth straight month, the Commerce Department reported Tuesday.

People bought homes at an annualized rate of 298,000, well below the 315,000 economists had predicted and far short of the 700,000 they consider represents a healthy market.

Sales are now headed to finish the year as the worst on records dating back half a century.

"This certainly will add to the negativity that is engulfing the overall economic outlook these days," Jennifer Lee, senior economist with BMO Capital Markets, said in a commentary.

Although supply and prices are falling, Lee said, "the negatives continue to overpower the positives for housing," as high unemployment, larger required down payments and tougher lending standards are preventing many people from buying homes.

Housing is a significant part of the U.S. economy, according to the National Association of Home Builders, with each home built creating an average of three jobs and $90,000 in taxes.

It's not just new homes sales that are weak.

Sales of previously occupied homes fell in July for the third time in four months, and they are trailing last year's 4.91 million sales, the fewest since 1997.

In a healthy economy, people buy roughly six million existing homes annually.

Plunging stocks and a growing fear that the U.S. could tip back into another recession are also keeping people from entering the troubled housing market.

A report last week on sales of previously owned homes showed that more sales than usual fell apart at the last minute, a sign that many buyers may be nervous about the economy.

At least 16 per cent of deals were canceled head of closings last month — four times the rate in May.

Foreclosures and short sales are forcing down prices. A short sale is when a lender accepts less than what is owed on the mortgage.