New Home Sales Weak in July; Trade Gap Hits 5 1/2-Year High

Providing more evidence of a sluggish economic recovery, the government reported Monday that new home sales were unexpectedly weak in July, while the U.S. trade deficit in the second quarter rose to a 5 1/2-year high.

New home sales fell 4.5% in the West and 5% across the nation in July from June, the Commerce Department said, as many buyers turned their backs on brand-new houses in the suburbs to snap up bargain-priced older homes closer to their jobs.

The Commerce Department also reported that the U.S. trade deficit widened to $34.39 billion in the second quarter, up 17.3% from the first three months of the year. The huge deficit--which was expected by analysts following dismal monthly data--was the largest quarterly shortfall since 1987, as sluggish economies overseas slowed demand for U.S. exports.

Monday’s reports were “two more ho-hum indicators of a ho-hum economy,” said Martin Regalia, chief economist of the U.S. Chamber of Commerce in Washington. “The economy is just trudging along, taking two steps forward and 1 1/2 steps back.”

The 5% drop in new home sales in July followed a revised 3.3% gain in June.

Analysts said new home sales were hurt by the bargains being offered for older homes. The National Assn. of Realtors said last week that sales for “used” homes rose 5.4% in July, as their median price dipped slightly to $109,200.

Conversely, the median price for a new home in July rose 2.4% to $124,900.

Analysts said the stage for the poor quarterly trade deficit was set nearly two weeks ago, when the Commerce Department said the June trade deficit alone was $12.06 billion--the second-worst in history.