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New homes sales unexpectedly sink 12.4 percent in July

Sales of new homes unexpectedly sank 12.4 percent in July to the lowest point in at least 47 years, underscoring continued weakness in the housing market, which tanked after the spring expiration of a tax credit for buyers facing a stagnant job market.

The Commerce Department said Wednesday that new single-family houses in July were sold at a seasonally adjusted annual rate of 276,000 units. It marked a 32.4 percent drop from the same month a year ago.

The July pace was the slowest on records dating to 1963. The past three months have been the worst on record.

Weak housing sales mean fewer jobs in the construction industry, which normally powers economic recoveries. On average, each new home built creates the equivalent of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.

Builders have sharply scaled back construction in the face of weak sales. There were about 210,000 new homes up for sale at the end of July, the lowest level in about 40 years.

Wednesday's report followed news Monday that sales of previously owned homes dived 27.2 percent over the prior month in July, igniting fresh concerns over the economic recovery.

The housing market has been weak since the April 30 expiration of the $8,000 federal tax credit, but the fall in new home sales was sharper than many experts had anticipated. Economists surveyed by Bloomberg News had expected some modest improvement in new home sales after they plunged in May and bounced back in June.

"A double-digit drop suggests to me that there wasn't just a tax effect at work in July, but a change in sentiment," said Christopher Low, FTN Financial chief economist.

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