New-Home Sales Slide

New-home sales fell 8.3% in August as the growing problems in credit and mortgage markets turned buyers away despite price cutting by builders to reduce their inventories.The U.S. Census Bureau reported that sales of new single-family homes fell from a seasonally adjusted annual rate of 867,000 in July to 795,000 in August -- down 21.1% from that of a year ago. Wells Fargo & Co. senior economist Scott Anderson pointed out that homebuilders are finally getting serious about price cutting and said he sees it spilling over to the existing-home market very shortly. On previously owned homes, "we are looking for about a 10% decline from peak to trough," he said. Price cutting on new homes will be "more severe than that," he added. As the credit crunch evolves, the Wells Fargo vice president said he is concerned that mortgage lenders will tighten further if price declines intensify. "They will have to reserve against [possible credit losses], and they will be more cautious," he said.