WASHINGTON (AP) -- New home sales tumbled in August to the slowest pace in 17 years, while the average sales price fell by the largest amount on record, demonstrating the depth of the problem that Washington is trying to solve.
The Commerce Department said Thursday that new homes sales fell by 11.5 percent in August to a seasonally adjusted annual sales rate of 460,000 units, the slowest sales pace since January 1991.
It was a much bigger sales decline than the small 1 percent drop that economists had been expecting. The average price of a new home sold in August dropped by a record amount of 11.8 percent to $263,900, compared to the July average of $299,100. The median price was also down, falling 5.5 percent to $221,900.
Besides the weak housing report, the government said Thursday that new claims for unemployment benefits shot up last week to the highest level in seven years. Orders to factories for big-ticket manufactured goods fell by a much-bigger-amount than expected amount of 4.5 percent in August. Both indicate the rising pressures facing the economy.
The big drop in new home sales followed news Wednesday that sales of existing homes were down 2.2 percent in August to a seasonally adjusted annual rate of 4.91 million units. Both segments of the market remain under pressure from the steepest housing downturn in decades.
That housing slump has contributed to a record surge in mortgage defaults, leading to billions of dollars in losses by financial firms and spawning a severe credit crisis that is threatening to send the country into a steep recession.
In a nationally televised speech Wednesday night, President Bush said the credit crisis could trigger a "long and painful recession" unless Congress acts quickly to pass a $700 billion bailout plan for the nation's financial system.
Senate Banking Committee Chairman Christopher Dodd told reporters after a negotiating session which included key Democrats and Republicans from the Senate and House that the group had "reached fundamental agreement on a set of principles." Other lawmakers predicted the package would win approval in Congress and be signed by the president.
In early afternoon trading, the Dow Jones industrial average was up 240 points. The Dow fell 563 points, or 4.95 percent, in the first three sessions this week so Thursday's buying didn't come as a surprise.
The report on new home sales showed that business was off in every region of the country except the Midwest, which posted a 7.2 percent increase. Sales plunged by 36.1 percent in the West and were down 31.9 percent in the Northeast. Sales fell a more modest 2.1 percent in the South.
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