GDP Revised Down Slightly; Home Prices Tank

There were two bits of economic news in the ethos today: one that was pretty good and one that was shockingly bad.

The Commerce Department reported early Thursday that gross domestic product had grown at a 3.8 percent annual rate in the second quarter of 2007. It was the department’s final reading of the quarterly number and represented a slight revision from the 4 percent reported last month. Most analysts had been expecting a slight downward revision to around 3.8 or 3.9 percent.

Still, the number was a welcome change from growth in the first quarter of the year which came in at 0.6 percent. Looking forward, economists polled by MarketWatch believe the economy will grow at a 2.3 percent annual rate in the third quarter, which ends Sunday.

The Commerce Department then delivered some troubling news about the housing market, reporting that sales of new homes dropped 8.3 percent in August to an annual rate of 795,000. This is the slowest rate for new home sales since June 2000. Analysts surveyed by both Bloomberg News and MarketWatch had expected the annual rate to be around 825,000. 

But the real shock was reserved for the report on home prices. The median sales price for new homes fell 7.5 percent compared with August 2006 to $225,700. It is the largest year-over-year decline in sales price in 37 years.

Home builder KB Home said in its earnings release Thursday that the outlook for new home sales is grim. “At this time, we see no signs that the housing market is stabilizing and believe it will be some time before a recovery begins,” said the company’s CEO Jeffrey Mezger in a statement. “We expect housing industry conditions to continue to worsen through the end of the year and into 2008.” The company reported a loss of $478.6 million for its fiscal third quarter ended August 31 on a 32 percent drop in revenues.