Newly constructed homes at a housing development in Novato, Calif.
Newly constructed homes at a housing development in Novato, Calif. - 
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Scott Jagow: Investors are bracing for more bad news this morning. The Commerce Department comes out with the numbers on new home sales for July. More now from Steve Henn.

Steve Henn: It's bleak out there if you are a home builder.

New home sales have fallen off just about 25 percent from last year, and many builders are holding huge inventories of unsold houses and facing a raft of contract cancellations.

Gregory Gieber: We have the largest inventory overhang we have ever seen in the housing industry.

Gregory Gieber follows the industry at AG Edwards. He says he expected sales to pick up a bit this summer as builders cut home prices to try to generate cash. But . . .

Gieber: If you can't arrange for mortgage money, you can't sell homes. And this could grind our industry to close to a halt.

And real estate analysts say the full negative effects won't show up in today's report. The real credit crunch didn't come until August, so they say next month's numbers will be even worse.

In Washington, I'm Steve Henn for Marketplace.