The number of people who bought new homes fell for the third straight month in July, putting sales on track to finish this year as the worst on records dating back half a century.
Sales of new homes fell nearly 1 percent in July to a seasonally adjusted annual rate of 298,000, the Commerce Department said Tuesday. That's less than half the 700,000 that economists say represent a healthy market.
Housing remains the weakest part of the economy. Last year was the worst for new-home sales on records that go back nearly 50 years.
While new homes represent less than one-fifth of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs and $90,000 in taxes, according to the National Association of Home Builders.
Analysts said the report was further proof that the housing market is stuck in the doldrums.
"How much longer can we flat-line on housing?" said M. Cary Leahey, senior economist at Decision Economics.
All types of home sales remain 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 6 million existing homes annually.
High unemployment, larger required down payments and tougher lending standards are preventing many people from buying homes.
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 percent 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.
Those homes are selling at an average discount of 20 percent, and they lower neighboring values. That's made many re-sales a bargain compared with new homes, creating an average 30 percent disparity in prices.
Sales of new homes doubled in the Northeast in July, but the region has the weakest sales in the country by far. In the South and West, sales fell 7.4 and 5.9 percent, respectively. Sales rose 2.4 percent in the Midwest.
The median price of a new home fell more than 6 percent to $222,000 nationally. But it is still roughly 27.5 percent higher than the median price of a re-sold home, which was $174,000 in July.
The number of new homes for sale at the end of the month dropped to a record low of 165,000, down 0.6 percent from June. At the July sales pace, it would take 6.6 months to exhaust the current supply. Economists consider a 6-month supply a normal level, indicating that builders are heavily cutting back construction.
Sales of new homes have fallen 18 percent in the two years since the Great Recession officially ended.
A telling sign of how bad things have gotten for the housing industry: Prices have dropped more since the recession started, on a percentage basis, than during the Great Depression of the 1930s.
And it took 19 years for prices to fully recover after the Depression.
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