WASHINGTON -- Sales of new homes fell to a six-month low in August. The fourth straight monthly decline during the peak buying season suggests the housing market is years away from a recovery.
The Commerce Department said Monday that new-home sales fell 2.3 percent to a seasonally adjusted annual rate of 295,000. That's less than half the roughly 700,000 that economists say must be sold to sustain a healthy housing market.
New-homes sales are on pace for the worst year since the government began keeping records a half century ago.
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 housing market.
Pierre Ellis, an analyst at Decision Economics, said that until wages increase and hiring picks up, home sales will languish.
The "bad news is the evident absence of optimism that sales will pick up to any degree," Ellis said.
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 for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.
Last year was also the fifth straight year that sales have fallen. It followed five straight years of record highs, when housing was booming.
The median sales price of a new home fell nearly 9 percent to $209,100 -- the lowest price since last October. That suggests builders are slashing their prices in order to compete with comparably lower-priced previously occupied homes.
Foreclosures and short sales -- when lenders accept less for a house than a mortgage is worth -- are forcing prices down. Those homes are selling at an average discount of 20 percent, and they are lowering neighboring home values. That's made many re-sales a bargain compared with new homes, creating an average 30 percent disparity in prices.
Many builders have stopped working on projects and are waiting for demand to pick up. Home construction is down nearly 6 percent over the past year.
Still, permits, a gauge of future construction, have risen nearly 8 percent this year. Builders may be preparing to start dormant project once the economy improves.
Sales were uneven across the country. They plunged 13.6 percent in the Northeast, which was hit by Hurricane Irene at the end of the month. They also fell 6.3 percent in the West and 2.4 percent in the South. They rose 8.2 percent in the Midwest.
All home sales remain weak. The August sales pace for previously occupied homes was 5.03 million. That's slightly above last year's sales, which were the fewest since 1997. Economists say roughly 6 million older homes need to be sold each year to sustain a healthy housing market.
Home prices have dropped more since the recession started, on a percentage basis, than during the Great Depression of the 1930s. It took 19 years for prices to fully recover after the Depression.